Group earnings forecasts for multi-jurisidiction casino operator Genting Malaysia Bhd are being reduced for the years 2018 and 2019 by Affin Hwang Investment Bank Bhd, on news that a theme park at the flagship Resorts World Genting property will not now open until the second half of 2018.
The institution nonetheless estimates that annual group revenue could rise to nearly MYR10.87 billion (US$2.55 billion) by 2018, partly on the strength of 20th Century Fox World Malaysia, a Hollywood-themed family facility. In 2016, the group’s revenue was MYR8.93 billion.
“New facilities have the ability to drive higher visitation growth. This is well reflected post the opening of the Genting Premium Outlet in second quarter 2017, whereby visitation growth [that quarter] is up 8 percent year-on-year, relative to the 3 percent decline in first quarter 2017,” said a Friday note from Affin Hwang analyst Ng Chi Hoong, referring to a shopping facility at Resorts World Genting. The latter is Malaysia’s only licensed casino resort, located at Genting Highlands, outside the capital Kuala Lumpur.
“Management is now guiding that the theme park opening has moved to second half 2018, which is a slight delay from its previous guidance of second quarter 2018. As such, we have also lowered our earnings-growth expectation for 2018-19,” said Affin Hwang in the report, which has been distributed by brokerage Daiwa Securities Group Inc.
Japanese brokerage Nomura said in a Friday note – referring to new facilities at the core property at Genting Highlands: “The question is whether all the capacity opened so far, namely the mass gaming area, shopping, dining and cable car, has started to boost earnings yet.”
Nomura’s analysts Tushar Mohata and Alpa Aggarwal added: “So far, all metrics seem to suggest that top-line inflection has begun, with Malaysia revenue up 7 percent quarter-on-quarter.”
The brokerage also stated: “More growth is expected as approximately 500 hotel rooms are added by year-end along with opening of new VIP gaming area by September. However, overall start-up costs (utilities/payroll) are clearly still eroding profitability, with Malaysia adjusted EBITDA [earnings before interest, taxation, depreciation and amortisation] margins at approximately 30 percent (down 5 percentage points year-on-year), and investors should expect this to hurt overall full fiscal year numbers.”
Net profit at Genting Malaysia fell by nearly 60 percent year-on-year in the second quarter of 2017.
The 20th Century Fox World Malaysia project is part of a major revamp for Resorts World Genting, with resort management having embarked on a 10-year, MYR10-billion master plan called the Genting Integrated Tourism Plan, or “GITP”.
Genting Malaysia also runs Resorts World Casino New York City, in the United States, Resorts World Bimini, in the Bahamas, and venues in the United Kingdom including Resorts World Birmingham.
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Chairman and chief executive of MGM Resorts, the parent of Macau casino operator MGM China