GGRAsia – Nomura cuts GEN Malaysia EBITDA on theme park timing

Nomura cuts GEN Malaysia EBITDA on theme park timing

Mar 23, 2018 Newsdesk Latest News, Rest of Asia, Top of the deck

Japanese brokerage Nomura says it has reduced its 2018 estimates for Genting Malaysia Bhd’s earnings before interest, taxation, depreciation and amortisation (EBITDA) in the absence of clarity about whether a theme park will open by year-end at that firm’s flagship Malaysian casino resort.

“We reduce our full-year 2018 EBITDA by 8 percent mainly to adjust for the timing of the launches of key attractions in Malaysia and the lower U.S. dollar assumption versus the Malaysian ringgit,” wrote analysts Tushar Mohata and Alpa Aggarwal in a Wednesday note.

They nonetheless still expect Genting Malaysia group EBITDA to grow by 18 percent year-on-year, to MYR2.68 billion (US$686.2 million).

The Nomura analysts were referring in particular in their EBITDA outlook to the question of the 20th Century Fox World Malaysia theme park that Genting Malaysia – operator of Resorts World Genting (pictured), that country’s only legal casino venue – has said would be open this year; and to the value of the country’s currency against the U.S dollar. Genting Malaysia denominates its earnings in Malaysian ringgit, although it also operates casinos in the United States, the Bahamas and the United Kingdom.

“One of the main investor concerns” regarding 2018 earnings was whether the planned launch of the theme park was still scheduled for end-2018, said the Nomura team.

“While management has reaffirmed its initial guidance of intending to launch the theme park by the end of this year, we believe we should get more clarity on whether there will be any revision to the timeline by the middle of this year, as the structures of the main attractions and rides will be ready for testing and some preliminary hiring for the theme park staff should begin,” stated the institution’s analysts.

They added: “For now, we assume that theme park-related revenues will start to contribute from financial years 2019 to 2020.”

In other commentary on Genting Malaysia, a Thursday note from Maybank IB Research suggested that a bill recently introduced in the United States Congress could resolve the issue of whether Genting Malaysia will be able to realise income from a U.S. tribal gaming project.

The Mashpee Wampanoag people within the U.S. state of Massachusetts have claimed the right to build a tribal casino, but the matter has become embroiled in a court battle.

“If [the bill is] passed, the Mashpee Wampanoag tribe will be able to construct First Light Resort and Casino, pay Genting Malaysia management fees and interest income, and eventually repay the US$285-million promissory notes that Genting Malaysia invested in,” said a memo from Maybank analyst Samuel Yin Shao Yang.

This would amount to Genting Malaysia receiving from the tribe “30 to 40 percent” of the proposed resort’s earnings before interest and taxation; and the tribe being able to “pay the 16.5 percent effective interest rate on the promissory notes and repay the promissory notes themselves”.