Genting Malaysia theme park impact from 2H18: analyst

May 08, 2017 Newsdesk Latest News, Rest of Asia, Top of the deck  

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Genting Malaysia Bhd, the operator of Malaysia’s only casino resort, is a “rising star” but looks “fairly valued for now,” said a report last week from Affin Hwang Investment Bank Bhd.

“While the company’s prospects still look strong, we think any significant upside would only materialise in second half 2018, as the 20th Century Fox [World Malaysia] theme park in Genting Highlands should only be operational by end-2017,” said analyst Ng Chi Hoong. The analyst was referring to a new Hollywood-themed family facility under construction at the Resorts World Genting complex. The whole site is in an upland area outside Malaysia’s capital Kuala Lumpur.

The report noted that Resorts World Genting (pictured) was likely to have an additional 650 hotel rooms available by year-end – namely 400 refurbished ones under what will be known as the Theme Park Hotel, and 250 “premium suites” currently being built.

“We estimate that this would increase [Resorts World] Genting’s total available rooms by 7 percent, which we think is crucial as it has close to a 93 percent occupancy rate,” said Affin Hwang in the report, which has been distributed by brokerage Daiwa Securities Group Inc.

Affin Hwang added its voice to those people that think a diplomatic dispute between China and South Korea – over the setting up in the latter country of a U.S.-supplied missile system – is hurting South Korea’s market for inbound Chinese tourism, and benefiting some neighbouring countries, including Malaysia.

“Beijing has banned Chinese tour groups from visiting South Korea… We think this change will benefit Genting Highland, as the increase in tourists to Malaysia could be an incremental positive for visitation growth since Genting Highland is a major attraction among Chinese tourists,” said Affin Hwang’s analyst.

A note in early April from Maybank IB Research said tourism industry data suggested the number of bookings for trips to Malaysia by Chinese tourists had risen 72 percent year-on-year for the period from March 16 to August 31 this year.

Maybank had said one of the “prime beneficiaries” of this market development was likely to be Genting Malaysia.

Affin Hwang tempered its own comments regarding the outlook for projected visitor numbers to Resorts World Genting in the period to 2020. The complex is undergoing a multibillion U.S. dollar, multi-year, revamp known as the Genting Integrated Tourism Plan.

“Despite these positive factors, we still think that the company’s target of 30 million visitations a year [by 2020] is overly optimistic,” said the institution.

Genting Malaysia – part of Malaysian conglomerate Genting Bhd – also operates casinos in the United States, the Bahamas and the United Kingdom.

A May 5 note from Affin Hwang regarding the Genting parent said that its higher dividend payout in 2016 – a net dividend per share of MYR0.125 (US$0.02884) versus MYR0.035 in 2015 – could be “an indicator of a higher [than 2015] payout in 2017″. The brokerage is currently estimating the Genting parent will provide a net dividend per share of MYR0.06 in 2017.

Affin Hwang noted the parent’s 2016 payout had been supported by higher dividend payouts from group units Genting Malaysia and Genting Singapore Plc, the latter the operator of Resorts World Sentosa in Singapore.

“Subsidiaries Genting Singapore and Genting Malaysia have increased their dividend payouts in 2016, and are likely to continue with that trend,” stated the brokerage.

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