Genting Malaysia Bhd
(Jan 6, RM3.88)
Maintain hold at RM3.89 with target price of RM4.10: GenM has signed a non-binding letter of intent (LoI) with New York State Urban Development Corp to develop an integrated mixed-use complex next to Resorts World New York (RWNY). The US$4 billion (RM12.6 billion) integrated resort (IR) will include a 3.8 million sq ft convention centre, 3,000 hotel rooms and casino expansion. It might see a binding MoU before the Nov 30 deadline as both the New York governor and mayor support the project, which will create jobs and bring in tax revenues and tourist dollars (largest MICE space in the US). This might improve its chances of securing approvals for table games at RWNY, although it would be a complicated process to amend the state constitution (currently, only Native American-owned casinos are allowed).
RWNY is expected to contribute 16% of GenM’s 2012F earnings. It is fully operational with 5,000 video lottery terminals (VLT) and 205 electronic gaming tables. Net win for the past two months had touched US$78 million, with average daily win/VLT at US$261 (based on 5,000 VLTs versus US$618 for 2,486 VLTs during the opening week). We assumed US$300 daily win/VLT in our forecasts, but that should rise with more promotional activities and an extensive bus programme. The covered walkway link to an adjacent train stop (to be completed by 2Q12) should improve accessibility further. RWNY can leverage on its strategic location i.e. 10 minutes from JFK Airport (huge transit passenger traffic) and 15 minutes from Flushing’s Chinatown (about 30 minutes from Manhattan’s Chinatown).
Stretching balance sheet and cash flow. If both the RWNY extension and RW Miami pan out, GenM’s capex could reach US$7.8 billion over the next five years or so. Assuming 70:30 debt-equity, 2013F net gearing could spike up to 86% (may be lower depending on timing of debt drawdowns), but GenM should be able to secure funding given its US$410 million net cash, healthy US$500 million per annum operating cash flow, and solid execution track record. Given limited details, it is premature to assess the earnings impact although Genting group typically targets a minimum of 15% IRR. — HwangDBS Vickers Research, Jan 6
This article appeared in The Edge Financial Daily, January 9, 2012.
(Jan 6, RM3.88)
Maintain hold at RM3.89 with target price of RM4.10: GenM has signed a non-binding letter of intent (LoI) with New York State Urban Development Corp to develop an integrated mixed-use complex next to Resorts World New York (RWNY). The US$4 billion (RM12.6 billion) integrated resort (IR) will include a 3.8 million sq ft convention centre, 3,000 hotel rooms and casino expansion. It might see a binding MoU before the Nov 30 deadline as both the New York governor and mayor support the project, which will create jobs and bring in tax revenues and tourist dollars (largest MICE space in the US). This might improve its chances of securing approvals for table games at RWNY, although it would be a complicated process to amend the state constitution (currently, only Native American-owned casinos are allowed).
RWNY is expected to contribute 16% of GenM’s 2012F earnings. It is fully operational with 5,000 video lottery terminals (VLT) and 205 electronic gaming tables. Net win for the past two months had touched US$78 million, with average daily win/VLT at US$261 (based on 5,000 VLTs versus US$618 for 2,486 VLTs during the opening week). We assumed US$300 daily win/VLT in our forecasts, but that should rise with more promotional activities and an extensive bus programme. The covered walkway link to an adjacent train stop (to be completed by 2Q12) should improve accessibility further. RWNY can leverage on its strategic location i.e. 10 minutes from JFK Airport (huge transit passenger traffic) and 15 minutes from Flushing’s Chinatown (about 30 minutes from Manhattan’s Chinatown).
Stretching balance sheet and cash flow. If both the RWNY extension and RW Miami pan out, GenM’s capex could reach US$7.8 billion over the next five years or so. Assuming 70:30 debt-equity, 2013F net gearing could spike up to 86% (may be lower depending on timing of debt drawdowns), but GenM should be able to secure funding given its US$410 million net cash, healthy US$500 million per annum operating cash flow, and solid execution track record. Given limited details, it is premature to assess the earnings impact although Genting group typically targets a minimum of 15% IRR. — HwangDBS Vickers Research, Jan 6
This article appeared in The Edge Financial Daily, January 9, 2012.
