Genting Malaysia Bhd
(Sept 12, RM4.39)
Maintain neutral with target price of RM4.35: We conducted a site visit to Genting Highlands recently, and had a view of the construction progress of the Genting integrated tourism plan (GITP) projects and new products the group has rolled out in the gaming segment. Separately, The Miami Herald reported that construction of the new pier at Bimini island had been completed and the Bimini SuperFast cruise ship will begin docking there from Thursday onwards. Also, bidders for the four New York upstate casino licences presented their proposals to the Gaming Commissions site selection committee last week, and the winning bids are expected to be awarded by the end of this year.
The group is targeting 500 rooms to be ready by the end of the year. From our site visit, we saw that the superstructure of the 1,300-room First World Hotel extension had been completed, and is only pending architectural and internal works to be done. Construction progress is currently on schedule. Construction of the retail mall adjacent to the outdoor theme park is also underway, with the superstructure already visible. Meanwhile, parts of First World Plaza and the indoor theme park have been closed for refurbishment, leaving a bare minimum of rides available. We believe this will continue to affect visitor numbers for the rest of the year, although the group is compensating with promotions of other entertainment programmes such as Ice Age Adventure, Sesame Street Live and other performances.
Launched in 2013, the Genting Club targets at premium players between the ages of 20 and 40 with its hip, modern design and exclusivity. The club features a 360-degree bar, an open concept restaurant serving a variety of gourmet cuisine, rare whiskies and wines at the LTITUDE Bar & Lounge and a gaming area, all accessible to members only. We understand Genting Club currently has around 1,800 members, and intends to keep membership below 2,000 to maintain its exclusivity.
We visited the Hollywood Casino, Circus Palace and Monte Carlo casinos where, despite it being a weekday morning, almost all tables were open and there was a decent buzz of activity. We also saw new electronic table games (ETGs) which allow multiple games to be played simultaneously on one screen, as well as the introductory tablet gaming whereby ETGs are played on tablets instead of conventional monitors.
The Bimini SuperFast will be expanding its ferry services to Fort Lauderdale from Tuesdays to Thursdays from mid-October, in addition to the existing Friday to Sunday cruises from PortMiami. We expect Bimini’s losses to reduce following the completion of the pier, which allows the Bimini SuperFast to dock directly at Bimini island and reduces travelling time.
New York upstate casino licences to be issued by the end of the year. Winning bids are expected to be awarded by the end of this year. Genting has reportedly submitted the most generous bid with its US$1.5 billion (RM4.8 billion) Sterling Forest proposal, including US$283 million in annual tax revenues to the state, financing the construction of a US$30 million new interchange, US$37 million annual contributions to local school districts and a US$450 million licensing payment, way above the minimum fee of RM70 million required by the state. We believe the Malaysian operations will continue to face challenges during the refurbishments, while Bimini’s turnaround will take time. The group’s earnings will see an impact only from 2016 onwards with the opening of the new Twentieth Century Fox World theme park. Maintain “neutral” for now as we do not foresee any catalysts in the near term. — PublicInvest Research, Sept12
This article first appeared in The Edge Financial Daily, on September 15, 2014.