RAM Rating does not expect Genting Malaysia Bhd (GenM) and its parent, Genting Bhd's ratings to be immediately affected by the sudden termination of the 20th Century Fox World outdoor theme park.
KUALA LUMPUR: CIMB Equities Research is maintaining its earnings per share (EPS) forecasts and target price of RM8.90 based on an unchanged 30% realised net asset value (RNAV) discount
to reflect weak equity market conditions.
It said on Monday Genting remains an Add. A re-rating catalyst is the opening of the new outdoor theme park in Malaysia in 2019 while the failure to do so is a de-rating catalyst.
The research house said the Genting Group has gone through a rough patch over the past three months:.
1) In November 2018, its 49.3%-owned subsidiary Genting Malaysia got hit by a 10 percentage point hike in casino tax in Malaysia.
2) In end-November, Genting Malaysia announced it was suing Walt Disney Co and 21st Century Fox Inc for more than US$1bil, which could lead to further delays in the opening of its new outdoor theme park.
3) Genting Malaysia booked RM1.834bil impairment for the Mashpee Wampanoag Tribe promissory notes.
On Dec 27, Genting announced that Wynn Resorts Holdings, LLC (WRH) had served the company an application for a temporary restraining order and motion for a preliminary injunction from further construction of the curved, bronze windows or horizontal banding at the Resorts World Las Vegas (RWLV) that allegedly constitute a portion of the unique and famous Wynn Design.
WRH has asked the US courts for the setting of a hearing motion for the preliminary injunction.
Following the suit, on 10 Jan 19, Genting filed its opposition, requesting the court to deny WRH’s
application as the preliminary injunctive relief is predicated on speculative extrapolation regarding the appearance of Genting’s unfinished work in RWLV, which is still in the early stages of construction.
Genting argued the design and construction of the RWLV resort and casino is ongoing and the completed project, when open for business in late-2020, will look dramatically different from WRH’s properties.
Genting also argued WRH has failed to demonstrate the threat of imminent and irreparable harm, which is a key requirement for the granting of any order of temporary or preliminary injunctive relief.
The court has granted an extension of time to Genting to file its response to the complaint. Construction at RWLV continues and remains on track to complete by end-2020, says Genting.
“Given the lawsuit, we are not surprised that WRH is seeking an injunction to halt construction work on RWLV.
“Genting has so far invested US$1bil and is expected to invest a total US$4bn to complete the construction of RWLV by end-2020.
“There is no impact on Genting’s FY18-20F EPS as RWLV is expected to start operations only from FY21F onwards. If WRH is successful in obtaining the injunction against RWLV, there
could be delays in the resort’s construction,” said CIMB Research.
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