Fund Managers' pick

CHOO SWEE KEE
TA Investment Management Bhd Stock pick: Genting Malaysia Bhd

GENTING Malaysia Bhd (GenM) embarked on its RM10.4bil Genting Integrated Tourism Plan (GITP) two years ago, which will see the hilltop location getting a facelift with a new 20th Century Fox theme park, refurbished hotel rooms, a new 250-suite premium hotel, a shopping centre (Sky Avenue) and a high-speed cable car system. Previously, many had regarded GenM’s assets as being on the matured side, with a jaded theme park and rather old hotel rooms. TA Investment, however, opines that GenM deserves a relook in 2017 after being out of favour with investors, as the GITP should provide it with a major rerating catalyst.

The outlook should get more interesting as the new attractions come onstream, starting with the new cable car system and the Genting Premium Outlet by the first quarter of 2017.

TA Investment’s positivity on the stock is premised on several catalysts. Firstly, the GITP will add gaming capacity, which, in turn, will translate into higher core gaming revenue.

The new non-gaming attractions will also attract more patrons to Genting Highlands, which, in turn, will increase the average spend per person.

Additionally, GenM is also catching the attention of Chinese tourists, as they seek to avoid visitations to Macau in view of the anti-corruption clampdown. Visitors from China rose 49% year-on-year (y-o-y) in the first nine months of 2016.

The Government has also made it easier for Chinese tourists to visit Malaysia by issuing e-visas within 24 hours for stays of up to 30 days.

Lastly, the weak ringgit should also help with visitor numbers, as it is affordable to the average tourist. This is evidenced by the rise in foreign arrivals by 7% y-o-y in the first nine months of 2016.

GenM aims to improve the number of visitors from 19 million in 2015 to 30 million by 2020 and this is possible with the GITP.

We expect these factors to drive earnings growth and GenM to have a good year.

CHUE KWOK-YAN
Head of research, Affin Hwang CapitalStock pick: Genting Malaysia Bhd