Maybank IB: Genting Malaysia's TP maybe trimmed if decision of US resort casino unfavourable

New high for Dagang NeXchange Bhd

PETALING JAYA: Maybank IB Research, which is closely monitoring the  U.S. Department of Interior’s (DOI) decision of the construction of the First Light Resort & Casino (FLRC) in Massachusetts, said it could trim Genting Malaysia Bhd’s (GenM) sum of parts (SOP)-based target price (TP) by RM0.20 a share if the decision is unfavourable. 

The research house on Monday said, however, if the decision by DOI of the proposed project is favourable then  the stock’s SOP-TP may get a RM0.14 a share lift. 

For now, the brokerage added that its financial year 2017, 2018 and 2019 earnings estimates were little changed at -3%/+1%/+1% and its SOP-based TP is tweaked +2% to RM5.40.

The DOI is expected to decide if the construction of the FLRC can proceed by June 19. 

The 900-room casino would be managed by  GenM and is a native American-destination resort casino in Massachusetts, US, to be built by the Mashpee Wampanoag (MW) tribe.

Recall that GenM has invested US$274mil (RM0.20 a share) in MW promissory notes that carry interest rates of 12% and 18% per annum. If the new record of decisions (ROD) is unfavourable, Maybank IB said the company may write off the investment and forego net interest income of about RM105mil. 

But if it is favourable, it estimate that GenM would also earn management fees of about RM60mil per annum for seven years from 2019 and lift our TP by RM0.14 per share. 

Currently, the research house assume that GenM would not write off the investment and earn interest income but would not yet earn management fees. 

In a statement last year, GenM said the casino would be opened in phases, without giving a timeline. When completed, the FLRC would feature, among others, a high-concept 150,000 sq ft casino featuring 3,000 slots, 150 gaming tables and 40 poker tables.

There would also be a luxury hotel complete with spa, a large pool and meeting facilities; a mid-range hotel with a 15,000 sq ft convention centre and a 200-seater 24-hour restaurant; a family hotel consisting of a 25,000 sq ft indoor/outdoor water park; and retail shopping destinations and a food court plus restaurants.

GenM said the group’s foray into the gaming industry in Massachusetts is expected to complement and further establish its growing presence in the US, where it already has operations and developments in the states of New York and Florida.

Besides Resorts World Genting, GenM owns and operates Resorts World Casino New York City, Resorts World Bimini, Resorts World Birmingham and other casinos in the UK.