Genting Bhd - Ventures into Las Vegas BUY

- Genting Bhd has proposed to acquire 87 acres of freehold land in Las Vegas, Nevada for US$350mil (RM1.1bil) from Boyd Gaming Corporation. The land has 1,523 feet of frontage on the Las Vegas Strip and lies within the gaming enterprise district. The property also includes several partially completed structures including a hotel tower, casino podium and convention centre. Independent valuers had appraised the value of the property at US$703mil.

- Genting Bhd will develop the property into an integrated resort called “Resorts World Las Vegas” (RWLV) with 3,500 hotel rooms and 175,000 sq ft of total gaming space. Genting Bhd will undertake the development with other parties and will announce the details of the development plans soon. RWLV is expected to open in 2016F.

- This is positive for Genting Bhd as the group would gain exposure to the casino market in Las Vegas. However on a group level, we are unsure as to why Genting Malaysia (GenM) was not the unit undertaking the project in U.S.A. We wonder if Genting Bhd would be undertaking the development with GenM to complete the project.

- Las Vegas Sands’ casino properties in Las Vegas recorded a table game win per unit of US$5,171/day and slot win per unit of US$209/day. EBITDA margin of the properties in Las Vegas was 23.9% in FY12.

- Assuming a table win of US$4,500/day on 200 table games and slot wins of US$150/day on 2,000 slot machines, then RWLV’s casino revenue would be about US$438mil. Our numbers exclude revenue from non-gaming activities such as hotel and food and beverage. Assuming an EBITDA margin of 20%, then EBITDA accruing to RWLV would be roughly US$87.6mil (RM272mil). In comparison, EBITDA of the leisure and hospitality division in Malaysia was RM2bil in FY12 and that of Singapore was S$1.36bil.

- Wynn Resorts’ casino properties in Las Vegas has 240 table games and 2,195 slot machines on 186,000 sq ft of gaming space while Venetian Las Vegas has 110 tables and 1,200 slot machines on 120,000 sq ft of gaming space.

- We do not know how much capex that Genting Bhd would have to invest further in RWLV. Assuming that the property has been about 50% completed, then we estimate that Genting Bhd would have to fork out another US$300mil to US$500mil (RM933mil to RM1.6bil).

- According to the Gaming Control Board, casino revenue in Las Vegas amounted to about US$10.9bil in 2012. Industry revenue was roughly US$37.4bil in Macau while in Singapore, the two casinos raked in casino revenue of S$5.2bil in 2012. Maintain BUY on Genting Bhd.

Source: AmeSecurities