We attended a small tour hosted by management in Genting’s Skytropolis and the Starlight Carnival which is located in an opened portion of the upcoming Outdoor Theme Park (OTP). Here are the key takeaways.

The highly anticipated OTP. Recall that on 26 Jul 2019, GenM announced a settlement agreement resolving disputes with Fox-Disney and dismissing all claims and counterclaims against each other. As of now, management is maintaining the targeted launch date of 3Q20, which we believe to be relatively conservative. The OTP will have a capacity of c.10,000 visitors per day and we gather that there will be initiatives to better manage the crowd and reduce the duration of physical queues for rides which could typically take up to several hours. The composition will consist of family-friendly rides making up for 60% of all rides and attractions. The OTP will also include 11 food kiosks and 7 restaurants from reputable franchises.

Rides and attractions. The OTP will house over 20 rides and attractions with most of its IPs to likely remain Fox-themed, with other potential IPs to cater to the Asian market. The theme park will span across 26 acres of land, with the option to expand additional space in the future to house a new theme and additional rides. The rides and attractions will be tailored to their respective themed-IPS as compared to the previous OTP which mainly used “off the shelf” amusement rides. Despite space being smaller than the previous OTP (as a portion has been used to build Sky Avenue), the range of products and aesthetics of the theme park has improved.

Pricing of tickets. Prices of tickets are still to be determined and we understand that it will be benchmarked against other theme parks of similar calibre. We expect it to be priced c.RM200/day pass after benchmarking it to Universal Studios Singapore. Additional passes will also be sold e.g. Express lane passes and Annual passes (typically priced at 2.7x day passes). Royalties required to pay for running the OTP IPs remain confidential.

Skytropolis. The up and running Indoor Theme Park, Skytropolis, is slated to operate a total of 22 rides by end-2019 (from 17 rides currently). Staffers of the Skytropolis will be given a promotional opportunity to be stationed in the upcoming OTP, which we note requires adequate training in order to meet its operating standards.

Forecast. We tweak our FY21 forecast upwards by 6.2% to better reflect the traction gained from the upcoming OTP as our previous forecast was too conservative. We maintain our HOLD call with an unchanged TP of RM3.38 and discount of 20% to our SOP-derived TP of RM4.21 based on an EV/EBITDA multiple of 9.0x (+1SD above 3 years mean). Despite the upcoming OTP slated to launch by 3Q20, we maintain our discount to reflect the uncertainties of the turnaround plans for the acquisition of Empire which will be hampering earnings beginning next year.

Source: Hong Leong Investment Bank Research - 21 Oct 2019