PETALING JAYA: Genting Malaysia Bhd’s operations in Malaysia would be able to cushion its earnings from any Brexit impact on the group’s UK operations.
AllianceDBS said the group’s UK operations contribute less than 10% of its earnings before interest, tax, depreciation and amortization (EBITDA).
“Brexit should not be a key drag. Although the group has overseas operations covering the UK and US, we expect the group’s operations in Malaysia to remain its key income contributor, accounting for more than 80% of the group’s EBITDA going forward,” it said in a report yesterday.
Genting Malaysia has 43 casinos in the UK, including Resorts World Birmingham, which started operation in October last year.
AllianceDBS said the commencement of Resorts World Birmingham was expected to increase forward earnings by 2%-3%.
The research house said it raised its financial year 2017 (FY17) and FY18 earnings forecast on Genting Malaysia by 4% and 7% backed by the potential 8% in visitor growth per year to Resort World Genting (RWG) between 2016 and 2018.
“We believe that our assumption of 8% visitor growth per annum to RWG between 2016 and 2018 is conservative,” AllianceDBS said.
It reckoned there are three catalysts for the Genting Malaysia stock, namely the additional gaming capacities from its launches of Genting Integrated Tourism Plan (GITP); the weaker ringgit that would attract foreign and local tourists and potential earnings growth from its GITP launches.
Note that the GITP involves the redevelopment and transformation of RWG.
AllianceDBS said Genting Malaysia’s GITP developments are on track, quoting its recent meeting with the management.
“Management has reaffirmed our investment thesis that the group is on track to launch Sky Avenue & Sky Plaza shopping malls, and the new cable car station by end-2016, and the 20th Century Fox world outdoor theme park by end-2017,” it said.
It said the GITP makeover would involve 300 new gaming tables situated in Sky Plaza, more than 50% from its current estimated 550 gaming tables.
“As such, we have assumed Genting Malaysia’s gaming table capacity to increase progressively from 550 to 800 tables by 2018 in our earnings model,” it said.
It added that Genting Malaysia is on track to meet its target of 30 million visitors by 2020.
“The increased visitations, coupled with the availability of 300 new gaming tables, are expected to drive its earnings,” it said.