KUALA LUMPUR: CIMB Equities Research is retaining its FY18-20F estimates for Genting Malaysia and maintains its Hold call with an unchanged realised net asset value based target price of RM5.25.
It said on Wednesday that even though it expects the group to post +15% on-year earnings growth on the back of normalising VIP hold rates and better gaming volumes, this is from a low base in FY17.
“We think that the group’s earnings growth from its Genting Integrated Tourism Plan (GITP) properties has already been reflected in its valuation of 10.4 times CY19F EV/EBITDA (in line with its 10-year EV/EBITDA mean),” it said.
CIMB Research recently visited Genting Highlands for a progress update on the development of its GITP properties, particularly its indoor (Sky Tropolis) and outdoor theme parks (20th Century Fox World).
“We noticed that all of its retail space leading up to the Awana Skyway has been fully occupied with F&B and retail tenants which should increase the group’s rental income, albeit only making up a small portion.
“Other than that, we also understand that Genting Malaysia’s indoor theme park, Sky Tropolis did not open for the Chinese New Year (CNY) festivities as its rides are still in the testing phase. The targeted official opening is still slated for early-2H18,” it said.
CIMB Research said even though half of Sky Tropolis remains walled up and is still under construction, several rides such as Ride ‘Em Round and Space Cadet and can be seen going through safety checks and trial runs before they open to public.
The research house said from its brief observation, the construction of the outdoor theme park remains ongoing but it will take some time before it is completed and officially launched.
While some of the buildings and structures were already visible, we also noticed that most of the featured rides have yet to be installed. The targeted opening of the theme park remains unchanged at this juncture and is slated to be launched by end-2018.
To recap, the group’s Malaysia operations experienced a double-digit uptick in both revenue and EBITDA in 4Q17.
This was mainly due to an overall better hold percentage from the mid-to-premium segment and higher business volumes from the mass market (due to year-end holiday and festivities), together with improved contribution from its new GITP properties.
“Note that it was badly hit by poorer luck factor from the VIPs and by increased start-up costs (i.e. higher staff and utilities costs) from GITP back in 3Q17.
“Meanwhile, we understand that the group’s key operating metrics remained healthy in FY17 with the group registering full-year visitor growth of 16.2% on-year to 23.6 million visitors (vs. FY16’s 20.3 million visitors).
“The group’s average FY17 room rates remained flat on-year at RM92 and the majority of the rooms occupied were by its Resorts World Genting (RWG) loyalty card members which accounted for 75% of the rooms taken up,” said CIMB Research.