April 20, 2012

Genting Malaysia - RWNY ' Chugging along nicely BUY

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: AMMBPrice Call: BUYTarget Price: 4.30




- Genting Malaysia Bhd (GenM) remains a BUY with an unchangedRNAV-based fair value of RM4.30/share. We continue to like the group for itsgrowing overseas exposure, which would underpin profit growth and undemanding valuations. 

- GenM is currently trading at FY12F PE of 13.9x and FY13FPE of 12.6x. In comparison, according to Bloomberg, the simple average FY12F PEof the Macau casino companies is 15.4x and 12.6x for FY13F (ex-Nagacorp).Genting Bhd is presently trading at 13.1x FY12F EPS and 12.1x FY13F EPS whilesister company, Genting Singapore PLC's FY12F and FY13F PEs are at 15.8x and13.6x, respectively. 

- We visited GenM's 'Resorts World New York (RWNY)' recently. Based on numbers released byNew York Lottery, RWNY is the market leader in the racino industry in New York,accounting for 45% of the share of credits played in the first three months ofthe year. Empire City had a market share of 27%.

- We forecast RWNY to record net revenue of RM646mil and EBITDAof RM129mil for FY12F. We are now assuming an average daily win ofUS$350/machine for FY12F, versus US$330/machine previously but lower non-gamingrevenue. RWNY is estimated to account for 5% of GenM's FY12FEBITDA.   

- Compared to Empire City Casino at Yonkers Raceway, we findRWNY's location to be better as it is closer to the city. From the city centre,it takes about 20 minutes to drive to RWNY, which is in Queens. In comparison,it would take more than half an hour to go to Empire City. 

- RWNY's name recognition is still weak. Most taxi drivers recogniseRWNY as its old name, 'Aqueduct'. We understand that RWNY would be stepping upon its advertising and promotional initiatives to improve its branding. 

- RWNY's clientele are mainly locals. During the day, mostof the players consist of retirees or senior citizens. Asians comprise 25% to30% of customers. The younger crowd comes in later at night.  

- Going forward, casino patronage at RWNY is expected to improvedue to the warmer weather. We understand that the weakest season is winter dueto the cold weather and shift in consumer spending towards retail. The bestperiod is in summer, i.e from July to August. 

- The seasonal trend has already been reflected in the improvingweekly revenue numbers reported to the New York Lottery Association. Creditsplayed at RWNY rose 4.6% in the week ended 1 April 2012 from the previous week,while average daily wins climbed 12.9% to US$395/machine. 

Source: AmeSecurities 

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