This article first appeared in The Edge Financial Daily on April 17, 2017

Genting Malaysia Bhd
(April 14, RM5.63)
Maintain add with an unchanged target price of RM6.14: We have recently organised a guided tour of the newly revamped Genting Highlands by Genting Malaysia Bhd senior vice president of finance and corporate affairs James Koh and 10 fund managers. We were reassured of the completion timelines for the Genting Integrated Tourism Plan (GITP) properties, particularly its outdoor theme park and the Genting Premium Outlet, which should drive strong visitation arrivals and by extension, casino visitations and revenues.

Following the closure of the group’s First World Hotel casino at the end of March, we understand that management has yet to decide its plans for the now vacant space. Genting Malaysia is currently focusing on overhauling its indoor theme park, which was officially closed earlier this month. When completed, it will feature new modern and futuristic themed attractions. It is targeted to open in tandem with the completion of Genting Malaysia’s outdoor theme park by the end of 2017. Meanwhile, management shared that it has partnered one of China’s largest cinema operators to bring a localised Chinese cinematic experience to Sky Avenue. We understand that the cinema (opening in May) will feature four screens plus two Imax theatres. We think that this is a positive development as it could create a “home away from home” experience for its targeted Chinese tourist market (estimated at 4% to 5% of total tourist arrivals).

During the casino tour, we discovered that Sky Casino’s newly revamped and large-scale electronic table games now seat approximately 50 players at any one time. Interestingly, the Sky Casino also offers betting iPad games, where patrons are allowed to either play on their own or available iPads within the vicinity of the casino, which we note is a new addition to its collection of games. Overall, we were encouraged to see the hustle and bustle in Sky Casino and Sky Avenue in spite of the ongoing disruption and construction site surrounding the area.

All in, we believe that Genting Malaysia’s share price will be rerated as investors reward the group with a higher enterprise value/earnings before interest, taxes, depreciation and amortisation multiple once its GITP properties complete and begin to mature.  We maintain our “add” call with an unchanged revalued net asset value-based TP of RM6.14. Downside risks to our call include any delay in the construction of its GITP facilities. — CIMB Research, April 13