Genting Malaysia Bhd (Oct 19, RM3.69)
Maintain hold at RM3.50 with revised target price of RM3.72 (from RM3.70): Resorts World New York (RWNY) will open with more video lottery terminals (VLTs) and electronic table games (ETGs) than initially expected, offset by a higher-than-expected number of staff and capital expenditure. Therefore, our earnings estimates are relatively unchanged. We tweak our target price from RM3.70 to RM3.72 and maintain our “hold” call on Genting Malaysia.
Genting Malaysia has announced that RWNY will open at 1pm local time on Oct 28 with 2,485 VLTs and ETGs and add 2,515 VLTs and ETGs by year-end for a total of 5,000. Genting Malaysia expects RWNY to generate up to US$800 million (RM2.48 billion) per year in gaming revenue, implying an average daily win per unit of US$440. We had expected only 4,525 VLTs and ETGs and average daily win per unit of US$400.
The company will hire 1,350 employees and has incurred US$580 million in net capex (US$830 million capex less US$250 million Empire State Development Corp construction grant). We had earlier expected only 1,150 employees and US$500 million in net capex. The higher-than-expected number of staff and capex are likely necessary to accommodate the 475 additional VLTS and ETGs.
After accounting for the above, save for the company’s higher average daily win per unit expectation of US$440, we leave our earnings estimates relatively unchanged. RWNY’s average daily win per unit will be publicly available as soon as the first week of November 2011 at the New York Lottery’s website. Until then, we leave our average daily win per unit assumption of US$400 unchanged.
To account for our revised estimates, we tweak our discounted cash flow-based target price upwards by two sen to RM3.72. Although we maintain our “hold” call, as we believe Genting Malaysia’s current share price already reflects RWNY, we foresee the opening as a test case of Genting Malaysia’s efforts to introduce table games at RWNY and destination resorts in Florida. Should RWNY be a roaring success, legislators in both states will likely accede to its efforts. — Maybank IB Research, Oct 19
Maintain hold at RM3.50 with revised target price of RM3.72 (from RM3.70): Resorts World New York (RWNY) will open with more video lottery terminals (VLTs) and electronic table games (ETGs) than initially expected, offset by a higher-than-expected number of staff and capital expenditure. Therefore, our earnings estimates are relatively unchanged. We tweak our target price from RM3.70 to RM3.72 and maintain our “hold” call on Genting Malaysia.
Genting Malaysia has announced that RWNY will open at 1pm local time on Oct 28 with 2,485 VLTs and ETGs and add 2,515 VLTs and ETGs by year-end for a total of 5,000. Genting Malaysia expects RWNY to generate up to US$800 million (RM2.48 billion) per year in gaming revenue, implying an average daily win per unit of US$440. We had expected only 4,525 VLTs and ETGs and average daily win per unit of US$400.
The company will hire 1,350 employees and has incurred US$580 million in net capex (US$830 million capex less US$250 million Empire State Development Corp construction grant). We had earlier expected only 1,150 employees and US$500 million in net capex. The higher-than-expected number of staff and capex are likely necessary to accommodate the 475 additional VLTS and ETGs.
After accounting for the above, save for the company’s higher average daily win per unit expectation of US$440, we leave our earnings estimates relatively unchanged. RWNY’s average daily win per unit will be publicly available as soon as the first week of November 2011 at the New York Lottery’s website. Until then, we leave our average daily win per unit assumption of US$400 unchanged.
To account for our revised estimates, we tweak our discounted cash flow-based target price upwards by two sen to RM3.72. Although we maintain our “hold” call, as we believe Genting Malaysia’s current share price already reflects RWNY, we foresee the opening as a test case of Genting Malaysia’s efforts to introduce table games at RWNY and destination resorts in Florida. Should RWNY be a roaring success, legislators in both states will likely accede to its efforts. — Maybank IB Research, Oct 19
