Part of a larger multi-year expansion
International casino giant Genting Malaysia Bhd says its earnings estimates are likely to be reduced for the years 2018 and 2019 by Affin Hwang Investment Bank Bhd. The outcome is due to delays in opening a theme park at the firm’s flagship property, Resorts World Genting near the Malaysian capital of Kuala Lumpur.
Despite the predicted drop, the bank also predicts that annual group revenues for the company could rise to nearly MYR10.87 billion (US$2.55 billion) by 2018, boosted in part by 20th Century Fox World Malaysia, the Hollywood-themed entertainment park. In 2016, the group’s revenue was MYR8.93 billion.
“New facilities have the ability to drive higher visitation growth. This is well reflected post the opening of the Genting Premium Outlet in second quarter 2017, whereby visitation growth that quarter is up 8 percent year-on-year, relative to the 3 percent decline in first quarter 2017,” said a note from Affin Hwang analyst Ng Chi Hoong, referring to a shopping facility at Resorts World Genting. The latter is Malaysia’s only licensed casino resort at Genting Highlands.
“Management is now guiding that the theme park opening has moved to second half 2018, which is a slight delay from its previous guidance of second quarter 2018. As such, we have also lowered our earnings-growth expectation for 2018-19,” said Affin Hwang.
In a related note, Japanese brokerage Nomura said of Resorts World Malaysia, “The question is whether all the capacity opened so far, namely the mass gaming area, shopping, dining and cable car, has started to boost earnings yet. So far, all metrics seem to suggest that top-line inflection has begun, with Malaysia revenue up 7 percent quarter-on-quarter.”
The brokerage said it expects more growth as approximately 500 hotel rooms are added by the end of the year, along with a new VIP gaming area. “However, overall start-up costs are clearly still eroding profitability, with Malaysia adjusted EBITDA margins at approximately 30 percent (down 5 percentage points year-on-year). Investors should expect this to hurt overall full fiscal year numbers.”
Net profit at Genting Malaysia fell by nearly 60 percent year-on-year in Q2 2017. The theme park is part of a 10-year, MYR10 billion (US$2.34 billion) master plan called the Genting Integrated Tourism Plan.
