Genting Malaysia Bhd
(March 31, RM5.45)
Maintain add with an unchanged target price (TP) of RM6.14: We paid a visit to Genting Highlands last Friday for a ground feel of the progress of Genting Malaysia Bhd’s upcoming Genting Integrated Tourism Plan (GITP) facilities, and we were pleasantly surprised to see that the first and second floors (catering to the mass gaming market) of its SkyCasino had just opened for business, much earlier than the expected target of the end of the first half of the year. The third and fourth floors, catering to VIP and gold card members, have not yet opened. 

Our channel checks reveal that the Genting Malaysia casino at its First World Hotel has officially been closed and the gaming tables have been shifted to the new SkyCasino. We estimate that the new casino has about 210 gaming tables and some 1,450 slot machines. We also noticed that the games added were similar to its older casinos, with minimum bets set at RM25 or RM50 per game. 

We were impressed by the new casino’s high ceilings and contemporary design and floor layout, while the casino’s floor area, which Genting Malaysia claims can comfortably fit two 747 planes, is irrefutably larger. We also think that it could potentially hold more gaming tables and slot machines as the space is not fully utilised yet. The casino is equipped with ceiling atrium LED screens which feature different innovative content to create a relaxing and calming ambience for patrons. 

During our cable car ride up, we also got a glimpse of the construction site of Genting Malaysia’s upcoming 20th Century Fox outdoor theme park, which we understand is expected to open by end-2017. All in, we are encouraged by the site’s development and note that there are visible large substructures already in place. As at end-2016, Genting Malaysia had spent a total capital expenditure of RM4.3 billion and had allocated RM3 billion for ongoing works for the GITP.

We are positive on the progress of the GITP’s various facilities. We also expect the opening of the Genting Premium Outlet by end-April, which could be another crowd-puller. We expect Genting Malaysia’s share price to be rerated as its additional gaming capacity and upcoming theme park start to unlock value. We maintain our “add” call with an unchanged revalued net asset valuation-based TP of RM6.14. Downside risks to our call include any delays in the construction of its new GITP facilities. — CIMB Research, March 31