Maybank ups Genting Malaysia's TP by 20% to RM4.85 on expansion

by **Cals** Mon 29 Jul 2013, 13:16

Maybank ups Genting Malaysia's TP by 20% to RM4.85 on expansion
Business & Markets 2013
Written by Jason Tan of theedgemalaysia.com
Monday, 29 July 2013 12:56

KUALA LUMPUR (July 29): Maybank Investment Bank has raised its target price (TP) for Genting Malaysia Bhd by 81 sen or 20% to RM4.85.

The upgrade comes after Genting Malaysia, a casino and resort operator, announced last Friday the planned revamp of its highland theme park under a joint venture with 20th Century Fox.

In a note today, Maybank said it has raised its TP for Genting Malaysia from the earlier estimated RM4.04. The research firm, however, retained its “buy” call for company.

Genting Malaysia shares were unchanged at RM4 on trading volume of 412,400 shares as at 11.32am.

The stock fell one sen to settle at RM3.99 at 12.30pm.

Maybank analyst Yin Shao Yang said : “We are positive that these rejuvenation and expansion plans will drive earnings growth going forward. We are also reassured that Genting is utilising its net cash constructively.”

Genting Malaysia's plan to revamp its theme park at Resorts World Genting (RWG) is part of a much-publicised RM3 billion capital expenditure over five years to undertake a facelift for RWG.

The plan includes rejuvenation of other parts of RWG with the addition of 1,300 rooms.

“In the past, revenue and visitor arrivals grew strongly when RWG was rejuvenated and expanded; this time should be no different,” Yin said.

Over the last four years, RWG’s revenue and visitor arrival growth had slowed to compound annual growth rates of 3% and 2% respectively, he said.

With more rooms, there will be more visitors and more gaming and non-gaming revenue as proven by the strong historical correlation between room count and revenue at RWG, according to Yin.

“As the 1,300 rooms will raise RWG’s room count by 13%, its revenues should grow by a similar percentage. We estimate that if RWG’s revenue were 13% higher, Genting’s revenue and EBITDA (earnings before interest, taxes, depreciation and armotisation) would rise by 9% and 11% respectively,” he said.