CIMB Research retains hold for Genting Malaysia, TP RM3.25

KUALA LUMPUR: CIMB Equities Research is retaining its earnings per share (EPS) forecasts and RM3.25 target price for Genting Malaysia (GentingM) and also its hold recommendation.

It said on Monday the target price was based on an unchanged 10% discount to RNAV and the discount was to reflect possible further provisions in the near future.

The research house said on Monday it hosted GentingM’s management at its annual Malaysia Corporate Day on Friday, where they met close to 40 fund managers and buy-side analysts.

Most of the investors’ questions were focused on the development on the new outdoor theme park (NOTP).

GentingM said it could not update investors on the possible opening date of the NOTP, indicating that it was still waiting for a court hearing date for the lawsuit against Walt Disney Co and 21st Century Fox Inc, in which GM is claiming more than US$1bil (RM4.14bil) in damages. 

“The company said construction of the NOTP is more than 95% completed but it will not be opened until after the lawsuit is settled,” it said.

To recap, in 2013, GentingM had intended to invest just US$150mil (RM620mil) in the NOTP and complete construction by end-2016. 

However, GentingM later decided to build a larger NOTP, which led to delays in the opening of the theme park. GentingM has so far invested US$750mil (RM3.1bil) in the NOTP. 

Before the lawsuit against Disney and 21st Century Fox Inc, GentingM was supposed to open the NOTP in mid-2019.

“With the rise in casino tax of 10 percentage points from Jan 1, 2019 onwards, we understand GentingM is looking at some cost cutting initiatives, which include reducing the incentives and rewards for major casino customers. 

“However, we believe this will likely happen gradually as GentingM will not want to lose its major casino customers. As for staffing, GentingM has around 14,500 staff currently and we understand the company does not intend to increase staff costs until the NOTP opening date has been set,” it said.