This article first appeared in The Edge Financial Daily, on October 9, 2015.

Genting Malaysia Bhd
(Oct 8, RM4.48)
Maintain hold with an unchanged fair value of RM4.30: Genting Malaysia Bhd (GenM) announced that Resorts World Birmingham, United Kingdom, will open at 10am on Oct 21. The first day will see retailers such as Next Outlet and Nike opening their stores.

Genting International Casino will open on Oct 26 together with the launch of the new James Bond movie, Spectre. The development cost of Resorts World Birmingham is estimated at £150 million (RM970 million) in total. Construction of the resort-cum-casino started in early 2013.

We are positive on the opening of Resorts World Birmingham although its earnings contribution to GenM is not expected to be significant.

Resorts World Birmingham would help smoothen the volatility of GenM’s UK division.

Earnings of GenM’s UK division have been volatile mainly due to the luck factor of the club-style high-end casinos in London.

In the second quarter of financial year 2015 (2QFY15), the performance of the UK division was exacerbated by a higher write-off of bad debts and a fall in the volume of business.

The UK division recorded a loss of RM99.9 million in 2QFY15.

We estimate that Resorts World Birmingham would improve GenM’s earnings before interest, taxes, depreciation and amortisation (Ebitda) in FY16 by 1% to 2%.

This assumes an average win per table of US$2,000 (RM8,440), average win per slot machine of US$200 and an Ebitda margin of 20%.

The casino at Resorts World Birmingham is relatively small as it is expected to have only 30 gaming tables, and 150 slot machines and electronic table games. In comparison, Resorts World Bimini, Bahamas, has about 20 to 30 gaming 

tables, and about 100 slot machines and electronic table games.

Resorts World Bimini recorded a smaller loss of US$30.5 million in the first half of financial year 2015 (1HFY15) versus US$32 million in 1HFY14. — AmResearch, Oct 8