News

• Las Vegas Review-Journal on 4th May 2016 reported that Nevada Gaming Control Board has recommended approvals of the suitability of officers, directors and shareholders, Genting’s registration as a public company and its interactive subsidiary for mobile gaming and a loyalty program for the project in Resorts World Las Vegas (RWLV).

• The recommendation is currently pending the consideration of Nevada Gaming Commission on May 19 and among the licenses recommended for approval Wednesday was an application from Genting Nevada Interactive Gaming to developing and manufacturing proprietary gaming machines and concepts.

Comment

• We are positive on the development of the news as Genting is now a step closer towards realizing the project. However, do note that the company still will need to apply for a full gaming license before RWLV can open (which was shared previously by management likely to be half a year before the target opening).

• To recap, GenT’s US$4bn Chinese-themed resort in RWLV was unveiled in 2013 with 3000 rooms and 150,000 sq ft of gaming space planned. However, the progress of RWLV has stalled since its ground breaking last May after receiving a preliminary finding of suitability from the control board and commission two years ago due to revise of design and challenging economic environment.

• From the news article, we understand that construction work is likely to speed up targeting to open by end-2018/begin- 2019 once relevant licenses are obtained from the gaming commission which will likely be a game changer on the north end of the Strip.

Risks

• 1) Regulatory risk; 2) Weaker hold percentage; 3) Pandemic breakouts; 4) Appreciation of RM; and 5) Higher-thanexpected cannibalisation from Marina Bay Sands (MBS) and Macau casinos.

Forecasts

• Unchanged as we have earlier factored in RWLV into our SOP with discounted cash flow at RM0.30 per share.

Rating

BUY

• We continue to like GenT as it will benefit from the catalyst of various expansion plans from its subsidiaries while having limited downside given its diversified business, stable and cash rich position.

Positives

• (1) Defensive stock; and (2) New sources of earnings from international markets to drive earnings growth.

Negatives

• (1) Highly regulated industry; and (2) Leisure and hospitality’s earnings highly dependable on luck factor and hold percentage.

Valuation

• Maintain a BUY call with an unchanged target price of RM10.00 based on our SOP-derived TP.

Source: Hong Leong Investment Bank Research - 6 May 2016