Genting Malaysia; Hold; RM4.00
Price Target: RM4.05; GENM MK

According to The Star, GENM’s Resorts World at Genting (RWG) will be undergoing a RM3b facelift over the next 5 years, including construction of a new themepark by Twentieth Century Fox which is set to softopen by 2016. The existing themepark will be closed from 1 Sep onwards to facilitate construction of the new one. GENM will also be adding 1300 hotel rooms next to First World Hotel.

This marks Twentieth Century Fox’s first international themepark, which will feature >25 rides and attractions over a 10ha plot – including characters from blockbuster films such as Ice Age, Rio, Alien, Predator, and Life of Pi. This should further boost RWG’s status as one of Malaysia’s top tourist and family attraction. RWG is in dire need of a facelift to compete more effectively with Resorts World at Sentosa (RWS). Newer themeparks such as RWS’ Universal Studios and Legoland in Johor have been gaining traction in attracting the family crowd.

We also look forward to room additions as RWG hotels have been running at consistently high occupancy rates (2012: 95%). Increased stay-in guests should help boost casino patronage given longer hours of play (as seen historically and in Macau). RWG welcomed 20.5m visitors last year with 72% being day-trippers, partly due to lack of accommodation. We also do not discount the possibility of additional gaming space being allowed in future.

Funding for the capex will unlikely be a concern given GENM’s strong balance sheet (RM2.1b net cash) and operating cashflows (~RM2b p.a.).

While we are positive on the above news, impact will likely be in the longer term. In the short-term, visitor arrivals may be affected marginally by the closure of the existing themepark (minimal impact to earnings due to low non-gaming contribution). Positive newsflow for GENM’s casino licence bids in Miami and New York will also likely be later rather than sooner.

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

Source: HwangDBS Research - 29 Jul 2013