PETALING JAYA: Genting Malaysia Bhd’s (GenM) possible exit from the Miami property market after more than a decade will likely see the group making big gains, says Maybank Investment Bank (Maybank IB) Research.
It said the leisure and hospitality group could realise proceeds of at least RM4.4bil and recognise a disposal gain of at least RM2.9bil or 52 sen per share.
“We do not expect GenM to declare special dividends but instead expect it to fortify its balance sheet as it bids for a lucrative downstate casino licence in New York,” said the research house in a report yesterday.
GenM shares hit an intraday high of RM2.66 on the report about the sale but the counter fell back to close two sen higher at RM2.57 on profit taking yesterday.
Genting Bhd’s share price mirrored GenM’s share price action, hitting an intraday high of RM4.63 in early trade, before closing six sen higher at RM4.56 yesterday.
Citing Bloomberg, Maybank IB Research said GenM’s 15.5-acre waterfront property in Miami, Florida, had attracted five offers so far, with each bidding at least RM4.4bil. The highest offer was just below RM6.6bil.
Back in May 2011 to September 2011, GenM had invested RM1.5bil for the acquisition of the waterfront asset. The company is expected to make its final decision in the coming weeks.
“GenM currently operates the Hilton Miami Downtown hotel on the aforesaid property but it contributed only RM21.1mil or less than 1% to the group’s earnings before interest, tax, depreciation and amortisation in the financial year 2022.
“Thus, the sale of the aforesaid property will not negatively impact our earnings estimates for GenM materially,” it said.
The research house added that it does not expect GentM to return the proceeds to shareholders via special dividends but will use the funds to strengthen its balance sheet through the bidding of a downstate casino licence for Resort World New York City. This licence will allow the casino to deploy table games.
“Competitors have guided investment amounts of up to US$5bil (RM22.1bil). Recall that we estimated a downstate casino licence could add more than 53 sen per share to our discounted cashflow target price,” it said.
It maintained a “buy” call on GenM with a discounted cashflow target price of RM2.97 a share, pending finalisation of the Miami property sale.