KUALA LUMPUR: Genting Singapore PLC’s contract to operate a hotel-based casino in Egypt announced on Tuesday, Dec 15 would only make a minimal contribution to group's earning beginning 2012, said ECMLibra Investment Research in a report dated Dec 16, 2009.
Genting Singapore PLC, a subsidiary of Bursa Malaysia-listed Genting Bhd, in an announcement yesterday said its indirect wholly owned subsidiary, Genting Casinos Ltd has been selected as the new operator of the casino at The Nile Ritz Carlton Hotel, Cairo in Egypt. Genting UK PLC has been awarded the casino concession for the hotel for an initial period of 10 years, and plans to open the new operation under the brand Crockfords on the Nile.
The Nile Hotel is owned by the Misr Hotel Company (Misr Hotel), which will shortly be undertaking a major refurbishment. The extensive renovation and refurbishment plan is expected to be completed in early 2012, and reopened as The Nile Ritz Carlton Hotel.
“We view the move positively as Genting Singapore expands its international presence to gain a foothold in Egypt," the research unit said.
The casino in Egypt is expected to cater to the premium market, as the casino concession for the hotel has been awarded to Genting UK, which currently operates high-end London casino clubs, it added.
However ECMLibra noted: “We expect earnings contribution to be minimal from Egypt beginning financial year ending Dec 31, 2012 unless Genting Singapore secures more casino concessions. As a comparison, Genting UK operates five casinos in London such as Crockfords Club.”
ECMLibra said it was unclear how much capital expenditure Genting Singapore needed to spend in Egypt.
“It is not expected to be significant given that Genting UK will operate only one new casino in Egypt. Hence, we do not expect further cash calls from Genting Singapore following its recent S$1.63 billion (RM4 billion) rights issue.
“As we expect minimal earnings contribution to accrue beginning FY12, we have made no changes to our earnings estimates. Our HOLD call is maintained with an unchanged target price of RM7.50 premised upon a 20% holding discount to our Sum-Of-Parts valuation,” said the report.
At 11.55 pm Genting Bhd is 3 sen down to RM7.09 on low volume of 1.35 million shares compared to 8.1 million shares traded on Tuesday when the counter rose 7 sen to RM7.12 at close.