Genting Malaysia continues to roll out new facilities under a MYR10 billion ($2.3 billion) revamp plan, though a theme park development with 20th Century Fox, seen as a key driver for growth, has now been delayed until the second quarter of next year.
The company opened the first and second floor of its new Sky Casino in March, which will cater to the mass market, while the third and fourth floors, dedicated to VIP and gold card members, are expected to come online in the third quarter.
According to a report by Alliance DBS Research analyst King Yoong Cheah the new floors will add a further 250 tables, increasing capacity by about 40 percent from the current 550 tables in operation.
The casino, which is in the Genting Highlands, has a forest theme and boasts being spacious enough to fit two 747 planes.
“We were impressed by the new casino’s high ceilings and contemporary design and floor layout,” analysts from CIMB wrote after a visit to the new property. “We also think that it could potentially hold more gaming tables and slot machines as the space is not fully utilized yet. The casino is equipped with ceiling atrium LED screens which feature different innovative content to create a relaxing and calming ambience for patrons.”
The analysts noted that the games added were similar to its older casinos, with minimum bets set at RM25 or RM50 per game.
The group held a soft launch for its Premium Outlets in June, while its Sky Avenue and Sky Plaza Shopping Malls were rolled out at the end of last year.
All are expected to improve visitation to the resort, which is seen as the key driver for growth for Genting. Although the group has properties worldwide, about 80 percent of consolidated EBITDA comes from the Malaysian operations, while 60 percent of its visitors are day trippers.
“Although additional gaming tables remain a key driver for its growth prospects, we continue to emphasise that sustained increase in visitations will be the key re-rating factor to sustain its earnings growth,” DBS said.
The brokerage expects visitation to rise from 19 million in 2015 to 24 million in 2018 and says it expects the company to hit its target of 30 million by 2020. However, given the strong domestic focus, it remains vulnerable to changes in consumer sentiment at home.
The 20th Century Fox theme park, which will be a first for the studio in Asia, is now scheduled to open in the second quarter of next year, pushed back from the end of this year. TA Securities notes that management is in the process of finalizing the design of various rides. It said the old First World Casino and theme park have now been closed down to make way for a new indoor theme park.
For Q2, Genting Malaysia reported a 59.4 percent year-on-year drop in profit due to higher depreciation and amortization from Malaysian operations. However, it said revenue rose 7 percent, getting a significant boost from the opening of new attractions at SkyPlaza in March 2017.
The property also saw visitation growth of 8 percent in the quarter, helped by the recent launch of Genting Highlands Premium Outlet and new attractions in SkyPlaza.
Although the Malaysian operations are steady, the group has run into headwinds in the U.S. over a project to manage the First Light Casino & Resort in Taunton, Massachusetts for the Mashpee Wampanoag (WM) Tribal Gaming Authority.
Genting invested $347.4 million in interest-bearing promissory notes by the tribe in return to run the casino seven years from the opening date. However, that investment is now in doubt due to issues linked to land-use rights. The legal action may be protracted.
“The group will work with the Tribe to review all options available for its investment in the promissory notes, and assess its recoverability and impact to the group’s consolidated earnings and net assets for the financial year ending 31 December 2017, Genting said in a statement to Bursa Malaysia. “The group is supportive of the Tribe’s endeavour to protect its land base and their associated development rights.”
The company also recently failed in its bid for a casino concession in Canada. Genting was one of a short-list of three to operate the casinos for at least 22 years in the Greater Toronto Area. The concession was granted to Canada’s Brookfield Properties and Great Canadian Gaming Corp. The three locations have more than 4,000 slot machines and 60 table games.
UOB Kay Hian Research said in a recent note that it now believes the risk from the First Light project has now been priced into the stock, while GGR is improving at Genting Highlands. It upgraded the shares to a hold.
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