Genting Malaysia Bhd(April 11, RM4.24)Maintain hold: Genting Malaysia’s Awana Skyway in Genting Highlands — that connects three stations Awana, Chin Swee and the highlands — has ceased operations recently to make way for the construction of a new cable car system. The new cable car system is said to have 106 gondolas which covers 2.8km. It would have the ability to transport up to 2,000 passengers per hour from Sri Layang/Awana to the highlands.
The construction of the new cable car is part of Genting Malaysia’s RM5 billion Genting Integrated Tourism Plan (GITP) that was announced in December 2013. To recap, Genting Malaysia announced that it would be constructing a new upper cable car in effort to improve its accessibility to the resort. The construction is expected to complete and open in 2016. We believe the completion date will fall within the same time frame as the completion of its newly constructed outdoor theme park, Twentieth Century Fox World.
Going forward, we are expecting more news flow on Genting Malaysia’s GITP efforts. Among others that have been announced are the development of a new hotel (three-star hotel with circa 1,300 rooms), upgrades on its show area (with seating capacity of 10,000 people), construction of a new multi-storey carpark as well as an additional bus space.
Although we do not expect any impactful boost to Genting Malaysia’s earnings from these numerous projects, we remain positive on the group’s long-term prospects as it would further attract more tourists/visitors into the resort post-expansion. Furthermore, we believe there would be some flow over from the additional visitors to the new outdoor theme park to its casino. Should this happen, the additional punters could be Genting Malaysia’s rerating catalyst going forward as gaming alone contributes more than 80% of earnings before interest, tax, depreciation and amortisation.
Maintain “hold” on Genting Malaysia with unchanged target price of RM4.49 based on sum-of-parts valuations. — HLIB Research, April 11
This article first appeared in The Edge Financial Daily, on April 14, 2014.