Genting Malaysia Bhd, operator of Resorts World Genting, Malaysia’s only casino venue, is unlikely to be negatively affected by any oversupply of casino gaming in the region, says a note from banking group Morgan Stanley.
“We see limited impact from gaming oversupply in the region: Genting Malaysia earnings have traditionally been driven by mass players, rather than VIP players, hence profitability of its Malaysia operations is the highest among regional peers,” said Thursday’s note from analysts Xin Jin Ling, Praveen Choudhary and Wayne Lau.
Resorts World Genting is located at Genting Highlands, a popular holiday area several hours by road from Malaysia’s capital, Kuala Lumpur.
“We forecast 15 percent EBITDA [earnings before interest, taxation, depreciation and amortisation] compound annual growth rate for Genting Malaysia in 2015-18, on the opening of GITP facilities starting third quarter 2016,” the bank added.
That was a reference to a major revamp of the facilities at Resorts World Genting; an initiative the casino operator calls the Genting Integrated Tourism Plan (GITP).
Morgan Stanley added: “Based on our forecast, mass/premium mass players will continue to contribute 55 percent of the revenue. Currently, 70 percent of Resorts World Genting visitors are day-trippers and this could increase with the new cable car system, which can transit up to 4,000 persons per hour versus current capacity of 1,600 persons per hour.”
They added: “After 0 percent EBITDA compound annual growth rate growth in 2011-14, we expect growth with new facilities such as 1,550 hotel rooms, [the] Sky Avenue lifestyle mall and the 20th Century Fox World theme park. We forecast a 54 percent rise in visitors by 2020.”
In February, Genting Malaysia had announced that it would be doubling the investment under the plan.
A note in April from Affin Hwang Investment Bank Bhd, had said Genting Malaysia’s gaming segment could “potentially benefit significantly” from the additional investment under the Genting Integrated Tourism Plan.
Japanese brokerage Nomura had said in a March note that completion of 20th Century Fox World Malaysia, as part of the Genting Integrated Tourism Plan, would “not happen before end-2017”.
Genting Malaysia – part of Malaysian conglomerate Genting Bhd – also operates casinos in the United States, the Bahamas and the United Kingdom.
Morgan Stanley’s Thursday note clarified it is acting as international financial advisor to the Genting Malaysia board, “in relation to Genting Malaysia’s proposal… for the disposal of Genting Malaysia’s stake in Genting Hong Kong Ltd”.
