GGRAsia – Resorts World Genting still cash cow for backer: Nomura

Resorts World Genting still cash cow for backer: Nomura

Apr 15, 2019 Newsdesk Latest News, Rest of Asia, Top of the deck

The Resorts World Genting casino resort near Malaysia’s capital Kuala Lumpur remains a “cash cow” for its promoter, despite a government hike in gaming taxes and licensing fees and uncertainty about the terms of a tax relief scheme relating to investment there.

That is the view of Japanese brokerage Nomura in a Friday note on Genting Malaysia Bhd, a firm which also runs casinos in the United States, the Bahamas, the United Kingdom and Egypt.

“We expect Genting Malaysia’s next leg of growth to come from its capex in Malaysia, which is a growing cash cow for the company and has boosted visitation and revenues,” wrote analysts Tushar Mohata and Alpa Aggarwal. They were understood to be referring to an ongoing revamp at Resorts World Genting known as the Genting Integrated Tourism Plan, or “GITP”. It involves a 10-year, MYR10-billion (US$2.4-billion), programme of spending.

Genting Malaysia has nonetheless been involved recently in a row about tax incentives for GITP that some analysts have said might act as a drag on the potential for the revamp to improve the firm’s balance sheet.

Referring to a separate tax issue, an announced rise in gaming tax applicable to the firm’s flagship Malaysian property, and to litigation in the United States over the stalling of what was to have been a Fox-branded outdoor theme park, Nomura: “The recent punitive gaming tax hike, and theme park dispute is likely to dampen EBITDA [earnings before interest, taxation, depreciation and amortisation] growth, but we believe the share price has already more than factored in the negatives.”

The impact of the gaming tax hike should become evident in May, at the time of Genting Malaysia’s first-quarter results, said the brokerage. A decision in the Malaysian courts – concerning a judicial review sought by the company in relation to the GITP tax incentives issue – was due by September, stated Nomura.

Other “key milestone dates” for investors to consider in the remainder of 2019 and into 2020 related to the litigation regarding the theme park.

“The court has stipulated that fact discovery and settlement conference is to be concluded by December 31, 2019; summary judgment motion to be filed by April 13, 2020; and trial to begin on July 14, 2020 if not settled previously,” noted Nomura.