GGRAsia – GEN Malaysia doubles investment in expansion plan

GEN Malaysia doubles investment in expansion plan

Feb 24, 2016 Newsdesk Latest News, Rest of Asia, Top of the deck

Casino operator Genting Malaysia Bhd on Tuesday announced that it would be doubling the investment under its Genting Integrated Tourism Plan (GITP), in order to expand and add new facilities to the firm’s Resorts World Genting casino resort (pictured).

This will increase the total capital investment to an estimated MYR10.38 billion (US$2.46 billion) from the original MYR5 billion announced in 2013.

Genting Malaysia launched the GITP in December 2013 to revamp Malaysia’s only casino resort. The 10-year plan is being carried out in phases.

“It will offer an extensive and wide array of new and exciting entertainment options, unique to visitors from across the region,” the casino firm said in its latest filing to Bursa Malaysia.

The capital investment under phase one of the GITP will increase to MYR8.11 billion from the original MYR4 billion.

The company said that under the first phase – previously scheduled to be fully completed by end-2016 – the planned 20th Century Fox theme park would see “a substantial increase in investment with more spectacular, thrilling and state-of-the-art rides than previously announced”.

Total investment in the theme park is now expected to exceed MYR2 billion, the firm said. The company did not provide a new date for completion of the first phase.

A note from CIMB Securities Ltd in October said Genting Malaysia had postponed the opening of the 20th Century Fox theme park until 2017.

In Wednesday’s filing, Genting Malaysia also said that the indoor theme park at Resorts World Genting would “undergo a major transformation turning into a unique themed entertainment attraction offering a total of 18 rides from the existing nine”.

The company still expects to open in stages other attractions and facilities from the second half of 2016. Those will include a new cable car system, the Sky Avenue and Sky Plaza shopping mall, and a multi-storey car park.

“As at end-2015, we understand that Genting Malaysia has invested MYR4 billion on Phase 1 which means that it will now invest another MYR2 billion per annum for two years. Thus, we trim our core net profit estimates by 4 percent on higher depreciation,” said a note from Samuel Yin Shao Yang of Maybank IB Research. “At this juncture, we are unsure if such a large investment will be worthwhile,” he added.

Phase two of the GITP – with an estimated cost of over MYR2 billion – will see the construction of additional luxury hotels at Resorts World Genting and of a new 10,000-seat arena.

Mr Yin said Maybank’s estimates did not include costs related to phase two of the expansion plan.

“These developments, to be undertaken over the next few years, will progress in tandem with the dynamic economic environment and market demands,” Genting Malaysia said.

“Once completed, the group anticipates that the GITP would elevate Resorts World Genting’s position as a major tourism attraction and the destination of choice in the region,” it added.

Higher profit

Also on Tuesday, Genting Malaysia announced it achieved an 11 percent year-on-year increase in total revenue – to MYR2.29 billion – in the fourth quarter of 2015.

Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) declined by 14 percent to MYR521.3 million compared to the prior year period. Net profit increased by 9 percent to MYR338.6 million in the last quarter of 2015.

Besides Resorts World Genting, the firm operates casinos in the United States, the Bahamas and the United Kingdom.

In full year 2015, Genting Malaysia’s total revenue increased 2 percent to MYR8.40 billion compared to 2014. Adjusted EBITDA went up by 3 percent to MYR2.31 billion. Annual net profit increased by 6 percent to MYR1.26 billion.

The company said it achieved higher revenues and adjusted EBITDA from the Malaysian leisure and hospitality business, contributed by overall higher volumes of business.

Despite higher costs relating to the premium players business, higher payroll costs and the impact of taxes, the Malaysian operations were able to maintain an adjusted EBITDA margin of 35 percent, the firm said.

The company’s U.S. operations also saw higher revenues and adjusted EBITDA, contributed by overall higher volumes of business and a favourable foreign exchange movement, said Genting Malaysia.

In the U.K., the overall revenue was affected by both lower hold percentage and lower volume of business from its international markets division, which caters to the premium players business, despite achieving a higher volume of business from its domestic division. There were also higher bad debts written off for the period which, coupled with the lower revenue, gave rise to an adjusted loss before interest, taxation, depreciation and amortisation, the company added.

Genting Malaysia declared a final single-tier dividend of MYR0.043 per ordinary share in respect of the financial year ending December 31, 2015. If approved, total dividend for full-year 2015 would amount to MYR0.071 per ordinary share, up by 9 percent compared to 2014.

“The fourth quarter 2015 results and dividends outperformed our expectations. Going forward, we are sanguine on Genting U.K. and Resorts World Bimini [in the Bahamas]. In fact, we gather that Resorts World Bimini may finally break-even soon,” said Maybank’s Mr Yin.