by S BIRRUNTHA / pic by BLOOMBERG
GENTING Bhd’s track record in managing integrated resorts should turn its latest Resorts World Las Vegas (RWLV) venture profitable in about three years.
RHB Investment Bank Bhd (RHBInvest) analysts Loo Tungwye and Lee Meng Horng in a note yesterday stated that — while they expect the venture to register some losses in the initial years — RWLV should be able to achieve positive Ebitda by FY22 given the steepening of the vaccination curve and Genting’s proven track record globally.
“At net profit level, we only expect it to be positive from FY24. Operating cashflow should be sufficient to cover its interest expenses and capital expenditure requirements going forward,” they stated.
RHBInvest has maintained its ‘Buy’ call on Genting with a higher target price of RM6.86 from RM6.27 previously, representing a 39% upside and a 4% yield.
Both analysts said the stock continues to have an attractive valuation and is a clear beneficiary of an eventual cyclical recovery.
That said, RHBInvest has cut the earnings forecasts for Genting by 52.3% to 4.6% for FY21 to FY22, on RWVL’s initial losses.
“After examining its peers’ performances, we expect negative Ebitda in FY21, as it will take time for RWLV to ramp up its business volumes. The revenue split between gaming and non-gaming is likely to be 35:65, in line with the LA Strip’s revenue split,” the report noted.
With total development and land costs of US$4.3 billion (RM17.72 billion) (US$ 3.1 billion incurred as at Dec 31, 2020), RWLV is set to open on June 24 this year and slated to be the first new integrated resort on the LA Strip in more than 10 years.
Genting bought the site back in 2013 for US$350 million and started construction works in late 2017. Works are still ongoing to complete the interior fit-out and furnishings of the hotel, casino, restaurants and retail venues, together with the swimming pools, spa, clubs and theatre.
Once completed, some features in the RWLV will include 117,000 sq ft (10,870 sq m) of gaming floor space, 3,500 hotel rooms, and 350,000 sq ft of meeting space. Notably, RWLV has also partnered Hilton to bring in three of the latter’s premium brands.
The analysts believe the development will help RWLV accelerate the occupancy rate and attract visitors by tapping into Hilton’s existing customer base and expertise in managing hotels.
They added that the LA Strip is a competitive but still profitable location, and it has a total of 60 unrestricted gaming licences.
“While the market is competitive, it is still an attractive place for RWLV to be in, as the total revenue of the LA Strip.