Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: MAYBANK
Genting Malaysia Bhd
(May 3, RM2.87)
Maintain sell at RM2.90 with unchanged target price of RM2.40: Genting Malaysia (GenM) will report its first-quarter (1Q) results by month-end. It seems the Malaysian resort continued to perform strongly in the quarter, notwithstanding the hype from newly opened Resorts World Singapore (RWS). We expect deterioration in ensuing quarters as the two Singaporean integrated resorts (IRs) ramp up to full operations.
About two-thirds of RWS' casino tables are currently operating, the hotels are fully occupied and visitor numbers at Universal Studios are up despite the flagship Battlestar Galactica ride being closed. The drop is in line with expectations. Elsewhere, the second IR, Marina Bay Sands, had its soft opening on April 27.
We believe GenM has a viable long-term niche among Malaysian and lower-budget punters. However, we expect curiosity to drive at least some of its core punters to Singapore over the next 12 months as both IRs become fully operational. Day-trippers accounted for 71% of GenM's 19.5 million visitors last year. The bulk of the hotel guests are Malaysian (56%). The balance includes mainly Singaporean (22%) and China/HK nationals (7%).
GenM had RM5.3 billion (93 sen per share) cash as at Dec 31, 2009 and generated RM2 billion earnings before interest, tax, depreciation and amortisation (Ebitda) last year. However, it paid out just 7.3 sen dividend per share (DPS), equivalent to a 24% payout ratio. GenM has been investing in MGM Mirage US dollar bonds, most recently US$48 million (RM154.08 million) at 4.25% last week. GenM now has a total US$116 million in MGM bonds, at coupons up to 11.125%.
Our earnings forecasts incorporate 10% revenue contraction in 2010, which might still be too optimistic. Our target price is discounted cash flow-based (11.7% equity discount rate: 4% risk-free, 6.5% market risk premium, 1.1 beta). We exclude balance sheet cash from our valuation, as this is unlikely to be returned to minorities in the near future. - Maybank IB, May 3
This article appeared in The Edge Financial Daily, May 4, 2010.
Company Name: GENTING MALAYSIA BERHAD
Research House: MAYBANK
Genting Malaysia Bhd
(May 3, RM2.87)
Maintain sell at RM2.90 with unchanged target price of RM2.40: Genting Malaysia (GenM) will report its first-quarter (1Q) results by month-end. It seems the Malaysian resort continued to perform strongly in the quarter, notwithstanding the hype from newly opened Resorts World Singapore (RWS). We expect deterioration in ensuing quarters as the two Singaporean integrated resorts (IRs) ramp up to full operations.
About two-thirds of RWS' casino tables are currently operating, the hotels are fully occupied and visitor numbers at Universal Studios are up despite the flagship Battlestar Galactica ride being closed. The drop is in line with expectations. Elsewhere, the second IR, Marina Bay Sands, had its soft opening on April 27.
We believe GenM has a viable long-term niche among Malaysian and lower-budget punters. However, we expect curiosity to drive at least some of its core punters to Singapore over the next 12 months as both IRs become fully operational. Day-trippers accounted for 71% of GenM's 19.5 million visitors last year. The bulk of the hotel guests are Malaysian (56%). The balance includes mainly Singaporean (22%) and China/HK nationals (7%).
GenM had RM5.3 billion (93 sen per share) cash as at Dec 31, 2009 and generated RM2 billion earnings before interest, tax, depreciation and amortisation (Ebitda) last year. However, it paid out just 7.3 sen dividend per share (DPS), equivalent to a 24% payout ratio. GenM has been investing in MGM Mirage US dollar bonds, most recently US$48 million (RM154.08 million) at 4.25% last week. GenM now has a total US$116 million in MGM bonds, at coupons up to 11.125%.
Our earnings forecasts incorporate 10% revenue contraction in 2010, which might still be too optimistic. Our target price is discounted cash flow-based (11.7% equity discount rate: 4% risk-free, 6.5% market risk premium, 1.1 beta). We exclude balance sheet cash from our valuation, as this is unlikely to be returned to minorities in the near future. - Maybank IB, May 3
This article appeared in The Edge Financial Daily, May 4, 2010.
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