Genting Malaysia; Hold; RM3.89
Price Target: RM4.05; GENM MK

According to The Edge Financial Daily, GENM is planning a RM3b facelift for Genting Highlands casino resort (RWG) over the next 2-3 years which is aimed at doubling profit. Plans are still being finalised which could see more hotel rooms, gaming tables and retail space being added. We understand the outdoor themepark may also be temporarily closed for upgrading works.

We see this positively as major capex for RWG is long overdue as the tired properties face rising competition from newer integrated resorts in Singapore, Macau and Manila. GENM has been talking about adding 700 rooms to First World Hotel (+7% capacity) by 2015. Whether GENM will be able to double profit and over how long a period would depend very much on how much gaming space can be added in view of Malaysia’s more hawkish stance on the gaming sector (gambling is prohibited under Islam).
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Funding should not be an issue given GENM’s strong balance sheet (net cash RM2.1b) and strong operating cashflows (~RM2b p.a.). Capex for New York (if GENM wins any bid for potential 3 casinos upstate) and Miami will likely be later rather than sooner pending regulatory changes (earliest end-2013 and end-2014, respectively).

Maintain Hold and TP of RM4.05, based on sum-of-parts.

Source: HwangDBS Research - 13 Jun 2013