MALAYSIA

Malaysia ops to drive growth at Genting

Genting Malaysia is forecast to see stronger earnings growth from next year as the main attractions of its 10-year tourism master plan are rolled out.

The company began the revamp of its Resorts World Genting property in December 2013. The MYR10 billion ($2.45 billion) plan involves a new cable car system, retail outlets, more casino space, luxury hotels an indoor theme park and another theme park developed with 20th Century Fox. It will be the first for the Hollywood studio outside of the U.S.

The opening of the park has been delayed until the final quarter of this year, though some analysts remain sceptical it will meet its launch deadline.

The Genting Integrated Tourism Plan is expected to be a key driver for growth at the operator, with the added hotel capacity and upgraded amenities expected to help diversify its visitor base and boost arrivals. The company also has properties in the U.K., the Bahamas and a racino in New York.

“We expect GENM’s next leg of growth to come from its capex in Malaysia, which should benefit from the expansion in capacity being undertaken by the group, funded by its monopoly in the Malaysian market, which is a growing cash cow for the company,” Nomura analysts said in a report. “With the bulk of capacity expansion coming to an end, we think earnings should rebound in 2019.”

Nomura expects Malaysia revenue and EBITDA to grow 13 percent and 18 percent respectively in 2018, with a sharper 16 percent and 27 percent step-up in 2019.

Genting says the new attractions have already had a significant impact on revenue. In Q1, overall revenue was up 8 percent to MYR2.39 billion, with growth coming mostly from its Malaysian operations in both the mass and premium segments of the market.

The Malaysian economy is expected to weaken to 5.1 percent growth in 2018 from 5.9 percent last year, further slipping to 4.5 percent in 2019, according to Nomura analysts. However, domestic consumption is expected to remain strong due to the government’s decision to zero rate the Goods and Services Tax from June to September, before reintroducing a Sales and Services Tax in September.

Last year, just over 70 percent of visitation to the resort came from local daytrippers, making the company vulnerable to downturns in consumer sentiment.

However, Genting hopes its upgraded facilities will pull in more premium players from around the region.

“The group remains committed to intensifying database marketing efforts to optimise yield management and improve operational efficiencies and service delivery at the resort,” it said in a report earlier this year. “Additionally, the group will place emphasis on strategic marketing efforts and leverage on the introduction of new world-class facilities and attractions at RWG to expand into regional markets.”

Fitch gives Genting Bhd A- debt rating

Fitch Ratings has given Genting Bhd a long-term foreign issuer default rating (IDR) of ‘A-’, which also applies to its units, including Genting Singapore and Genting Overseas Holdings Ltd.

Fitch said the ratings reflect Genting’s monopoly position in gaming in Malaysia and robust market share in Singapore, which is further helped by a high level of regulatory oversight and resultant barriers of entry, which give Genting a degree of stability to its cash flows.

Furthermore, Fitch said that the firm also enjoys diversification benefits from its business in the UK, US and Bahamas, along with its oil-palm plantations, power, property and oil and gas businesses.

Berjaya fiscal Q3 profit drops 91 percent

Berjaya Assets Bhd saw its net profits decline 90.8 percent year-on-year in the third quarter ending March 31, 2018, down to RM16.6 million (US$4.2 million).

The drop was mainly due to a reversal in taxes in dispute, but it also saw a lower contribution from its business segments overall, and higher operating expenses. Quarterly revenue fell 12.2 percent to RM 76.6 million, down from RM 87.2 million in 2017.

“The lower group revenue was mainly due to the gaming business segment operated by Natural Avenue Sdn Bhd (NASB) which continued to be impacted by rampant illegal gaming activities.”