KUALA LUMPUR (Nov 28): Genting Malaysia Bhd (GenM) staged a mild recovery and rose 1.67% in active trade at mid-morning today despite concerns that it may not be able to complete its 20th Century Fox World Theme Park project, in which it has invested US$750 million (RM3.14 billion).

After losing some RM3.39 billion of market capitalisation yesterday, GenM rose 5 sen to RM3.05 with 35.44 million shares done this morning. Shares of its parent Genting Bhd also rose 10 sen or 1.57% to RM6.48, with 2.22 million shares traded.

Yesterday Bloomberg reported that GenM had sued Twenty-First Century Fox and its soon-to-be new owner, Disney, for pulling out of an agreement for a Fox World theme park at its casino resort outside Kuala Lumpur.

This is a major negative surprise, said CIMB IB Research, which maintained a "hold" call on the stock with an unchanged target price of RM4.85.

The research house said it is maintaining its earnings forecasts and "hold" call pending a conference call with the group's management this Friday on its 3QFY18 results.

"GenM's theme park was supposed to open in end-2017 but the date has been delayed to 1H2019. Due to potential legal complications, we are concerned if GenM could still open the theme park in 1H2019," it said in a note yesterday.

CIMB added that forecasts for high visitor arrivals in 2019 and 2020 could be unrealistic, as a result of uncertainties surrounding the opening of the park.

"Due to the opening of the new theme park in 2019F, we had earlier forecast visitor arrivals to rise 14-15% in 2019/2020F. Now, it looks like our forecasts could be too optimistic," it said.

In its report, Bloomberg noted that GenM is seeking more than US$1 billion in damages, according to a complaint filed Monday in federal court in Los Angeles, in which the reason for Fox terminating the deal, according to GenM, is that Disney doesn't want to be associated with a gaming business.

Meanwhile, in a sector update yesterday, Hong Leong IB Research (HLIB Research) said it opines that the theme park will still proceed, possibly under a different brand, as Disney is only the licensor.

"We are of the view that the theme park will eventually [be rolled out] despite the ongoing tussle with Disney as GenM is still the asset owner while Disney is only the licensor," said HLIB Research, adding that this, however, will likely fall out of its forecast horizon.

The research house said that in the worst case scenario, it may involve rebranding exercise (other theme park brand or own brand) and that would incur additional capex on the redesigning of themes and rides.

"We upgrade GenM to 'hold' with lower SOP-derived target price of RM3.41 ([from] RM4.01) given the share price plunge," it said.