Genting Malaysia Bhd (Feb 8, RM3.81)
Maintain outperform with fair value RM4.20: Genting Malaysia’s plans to build a US$3.8 billion (RM11.4 billion) 5,200-room resort overlooking Miami’s Biscayne Bay have stalled with the postponement of the vote on a bill to expand casino gambling by a Florida House of Representatives committee. What this means is that there is little chance that lawmakers will approve this sensitive bill this year, being an election year.
According to news reports, Jessica Hoppe, vice-president of Resorts World Miami, said the company had not decided on its next plan of action, which could include taking the issue directly to voters.
According to state records, the Genting group contributed US$629,529 in the final seven months of 2011 to Florida lawmakers, parties and political committees, including US$385,000 to the state Republican Party, which controls the legislature and the governor’s office.
While this may be disappointing news, we believe the game is not over for Genting Malaysia’s Miami project, as it is just a postponement of the vote and not a vote against casino gaming completely.
In addition, there are still other avenues for the company to explore in order to get the project approved by lawmakers. As management has assured us that the US$3.8 billion will not be spent unless the casino law is approved, we do not expect there to be any financial impact from this delay.
Risks include: (i) a slower than expected global and regional economic recovery, which could affect domestic sentiment and visitor arrivals; (ii) lifting of domestic subsidies for food and transport costs, which would lower disposable income; and (iii) intensifying competition from regional players.
We make no change to our forecasts. Our sum-of-parts-based fair value remains at RM4.20 and we maintain our “outperform” recommendation on the stock. — RHB Research Institute, Feb 8
This article appeared in The Edge Financial Daily, February 9, 2012.
Maintain outperform with fair value RM4.20: Genting Malaysia’s plans to build a US$3.8 billion (RM11.4 billion) 5,200-room resort overlooking Miami’s Biscayne Bay have stalled with the postponement of the vote on a bill to expand casino gambling by a Florida House of Representatives committee. What this means is that there is little chance that lawmakers will approve this sensitive bill this year, being an election year.
According to news reports, Jessica Hoppe, vice-president of Resorts World Miami, said the company had not decided on its next plan of action, which could include taking the issue directly to voters.
According to state records, the Genting group contributed US$629,529 in the final seven months of 2011 to Florida lawmakers, parties and political committees, including US$385,000 to the state Republican Party, which controls the legislature and the governor’s office.
While this may be disappointing news, we believe the game is not over for Genting Malaysia’s Miami project, as it is just a postponement of the vote and not a vote against casino gaming completely.
In addition, there are still other avenues for the company to explore in order to get the project approved by lawmakers. As management has assured us that the US$3.8 billion will not be spent unless the casino law is approved, we do not expect there to be any financial impact from this delay.
Risks include: (i) a slower than expected global and regional economic recovery, which could affect domestic sentiment and visitor arrivals; (ii) lifting of domestic subsidies for food and transport costs, which would lower disposable income; and (iii) intensifying competition from regional players.
We make no change to our forecasts. Our sum-of-parts-based fair value remains at RM4.20 and we maintain our “outperform” recommendation on the stock. — RHB Research Institute, Feb 8
This article appeared in The Edge Financial Daily, February 9, 2012.
