News

Yesterday, Genting Malaysia Bhd (GENM) announced that the GBP150m Resorts World Birmingham (RWB) will open later this month on 21 Oct with the casino floor, The Genting International Casino set to launch on 26 Oct.

Comments

We are neutral on the opening of this Europe’s first resort destination as the group’s UK operations have not been smooth sailing all these years as earnings were fairly volatile for its VIP-centric clientele. However, hopefully with the large scale integrated resort operating concept which may be able to attract a more diverse customer base as opposed to the existing casino operations which are mainly clubbased, we may see better earnings prospects for its UK operations.

RWB, a 7-floor 538,000 sq ft integrated destination leisure complex located in the National Exhibition Centre in Birmingham, which offers 18 bars and restaurants, 50 retail shops (open on 21 Oct), an IMAX cinema known as Cineworld (open on 23 Oct), The Genting International Casino, a 4-star 180-room Genting Hotel (open on 2 Nov) and Genting Arena, the second largest concert arena in the UK.

Outlook

Closer at home, the RM5b 10-year refurbishment program will be a structural change to its home turf operations and acts as an earnings catalyst from 2016 onwards. The theme park is on track to be ready by end-2016/early 2017 with no cost overrun at this juncture.

On the other hand, the yield management initiative should help to improve earnings while the Resorts World New York City’s numbers should be sustainable. Resorts World Bimini’s new 300-room luxury hotel is expected to reduce its operating loss and breakeven in 2H15. However, the UK operations could continue to see tougher times due to its VIPcentric nature. Hopefully with the opening of Resorts World Birmingham, the UK operations could improve further. Changes To

Forecasts

No changes to FY15-FY17 estimates.

Rating

Downgrade to MARKET PERFORM from OUTPERFORM following the recent rebound in share prices especially yesterday which saw a rally of >4%.

Valuation

Price target is maintained at RM4.41/SoP share.

Risks to Our Call

Poorer luck factor.

Source: Kenanga Research - 8 Oct 2015