Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on July 25, 2019

Genting Malaysia Bhd
(July 24, RM3.70)
Upgrade to buy with a higher target price (TP) of RM3.80:
We gather that Resorts World Genting (RWG) could be opening its outdoor theme park (OTP) a lot earlier than we expected.

Our earnings estimates are unchanged but we have removed the 10% discount we ascribed previously to our sum-of-parts-based valuation on added certainty that the OTP will finally open.

Our revised TP is RM3.80 (RM3.40 previously). We are optimistic that the OTP will drive Genting Malaysia Bhd’s next phase of earnings growth regardless of whether it opens in the first quarter of 2021 (1Q21) as we expect or earlier.

Over the last two weeks, RWG has taken out full-page job advertisements for its theme park division in local newspapers. While we understand that this division oversees both the Skytropolis Indoor Theme Park and the OTP, Skytropolis has been open since December 2018.

This suggests to us that the OTP, currently the subject of a US$1 billion (RM4.12 billion) lawsuit between Genting Malaysia and Fox Entertainment Group/The Walt Disney Co (Disney), could be ready to open soon. We understand that construction of the OTP is about 95% completed (as at July 2019).

Before Genting Malaysia fell out with Fox/Disney in November 2018, it also took out job advertisements for 20th Century Fox World in May 2018.

Back then, Genting Malaysia guided that 20th Century Fox World would open in 4Q18 to 1Q19. It implied a lead time of six to nine months between hiring and opening of the theme park.

Applying the same lead time suggests to us that the OTP could be opened in 1Q20 to 2Q20, much earlier than our forecast of 1Q21.

At this point, we are unsure if Genting Malaysia will reconcile with Fox/Disney, partner other studios, share royalties with them or operate the OTP on its own.

Thus, we think it is best to leave our earnings estimates unchanged for now, which assume that the OTP will open in 1Q21. — Maybank IB Research, July 24

      Print
      Text Size
      Share