We are maintaining our HOLD call for Genting Malaysia (GENM) with an unchanged TP of RM6.00. The 1QFY17 EBITDA at RM566mn (+27% YoY) is within our expectation but slightly below consensus as it constitutes to 22% and 20% of our respective forecast. While management had mentioned that the performance of the newly opened Sky Casino is within expectation, they had also revealed that the highly anticipated theme park has now been delayed till 2Q2018.

Malaysia – Theme Park Is Now Delay to 2Q2018

Overall revenue for the Malaysia operation is flat YoY, as it barely benefited from the newly opened sky casino in late March. Management has indicated that there is some uptick in mass market volume, but we believe that it will take some time before it achieves full earnings potential. The delay in the opening of the 20th Century Fox Theme Park from end of 2017 to 2Q18 will likely result in a muted visitation growth for the year. EBITDA margin will also to be under pressure with the cost related to the recent opening for Sky Casino and Sky Avenue.

UK – Still on the Right Track

The EBITDA for its UK operation has fallen by 21% YoY to RM78mn, which was the result of the 12% YoY decline in revenue. The decline can be attributed to a lower hold percentage from the VIP market, despite experiencing a significant uptick in volume. However, the earnings for the UK business is always volatile, due to the volume contribution from the high rollers; as such we believe the growth would resume as the hold percentage normalised. Management are also actively targeting premium mass players as it provides more stability to its earnings.

US – “Rented” Machines Boasted Profitability

The US operation has managed to record a 78% YoY increase on EBITDA on the back of 9% YoY increase in revenue. The better results can be attributed to the newly installed VGM that were “rented” from Nassau County, which RWNY gets a larger share of the net win. Although RWNY has license to put in another ~500 VGMs above the ~5,500VGMs they have currently, management did not provide any guidance on the time line.

Maintain BUY With a Lowered TP of RM6.00

We keep our HOLD call on GENM, with an unchanged TP of RM6.00, as we maintain our earnings forecast unchanged. The biggest surprise to us was the announcement of the delay of the theme park, but it was not the first delay as the opening date was pushed back at least twice on our count

Source: Affin Hwang Research - 30 May 2017