Genting Malaysia - RWNY – Chugging along nicely BUY

- Genting Malaysia Bhd (GenM) remains a BUY with an unchanged RNAV-based fair value of RM4.30/share. We continue to like the group for its growing overseas exposure, which would underpin profit growth and undemanding valuations. 

- GenM is currently trading at FY12F PE of 13.9x and FY13F PE of 12.6x. In comparison, according to Bloomberg, the simple average FY12F PE of the Macau casino companies is 15.4x and 12.6x for FY13F (ex-Nagacorp). Genting Bhd is presently trading at 13.1x FY12F EPS and 12.1x FY13F EPS while sister company, Genting Singapore PLC’s FY12F and FY13F PEs are at 15.8x and 13.6x, respectively. 

- We visited GenM’s  “Resorts World New York (RWNY)” recently. Based on numbers released by New York Lottery, RWNY is the market leader in the racino industry in New York, accounting for 45% of the share of credits played in the first three months of the year. Empire City had a market share of 27%.

- We forecast RWNY to record net revenue of RM646mil and EBITDA of RM129mil for FY12F. We are now assuming an average daily win of US$350/machine for FY12F, versus US$330/machine previously but lower non-gaming revenue. RWNY is estimated to account for 5% of GenM’s FY12FEBITDA.   

- Compared to Empire City Casino at Yonkers Raceway, we find RWNY’s location to be better as it is closer to the city. From the city centre, it takes about 20 minutes to drive to RWNY, which is in Queens. In comparison, it would take more than half an hour to go to Empire City. 

- RWNY’s name recognition is still weak. Most taxi drivers recognise RWNY as its old name, “Aqueduct”. We understand that RWNY would be stepping up on its advertising and promotional initiatives to improve its branding. 

- RWNY’s clientele are mainly locals. During the day, most of the players consist of retirees or senior citizens. Asians comprise 25% to 30% of customers. The younger crowd comes in later at night.  

- Going forward, casino patronage at RWNY is expected to improve due to the warmer weather. We understand that the weakest season is winter due to the cold weather and shift in consumer spending towards retail. The best period is in summer, i.e from July to August. 

- The seasonal trend has already been reflected in the improving weekly revenue numbers reported to the New York Lottery Association. Credits played at RWNY rose 4.6% in the week ended 1 April 2012 from the previous week, while average daily wins climbed 12.9% to US$395/machine. 

Source: AmeSecurities