KUCHING: Genting Malaysia Bhd’s (Genting Malaysia) plans for a RM3 billion facelift for its Genting Highlands casino resort has been viewed as a positive move which could ensure that the group’s forward trajectory remains intact in the long run.
Analyst Kong Heng Siong from RHB Research Institute Sdn Bhd (RHB Research) highlighted this in a research note yesterday, adding that the RM3 billion plan to revamp the casino resort will boost visitation as well as spark gamblers’ interest.
“We are positively surprised by the move as management has not disclosed its intention of revamping its Malaysian operation.
“While Genting Highlands is a de facto monopoly, being the country’s only licensed casino operator, its annual visitor growth has slowed to a low-single digit,” the analyst highlighted.
To note, according a a media report, chairman and chief executive Tan Sri Lim Kok Thay was quoted as saying at the company annual general meeting on Wednesday that the RM3 billion is ‘just a ballpark figure’ and ‘plans are still being finalised”.
He was also quoted as saying that the idea is to ‘double Genting Malaysia’s net profit’, while confirming that plans should be finalised within this year.
“Our model is forecasting for Genting Malaysia to generate annual operating cash flow of RM2.2 billion to RM2.4 billion over the next three years. This would come in handy to cover the potential RM3 billion capital expenditure,” Kong said.
Meanwhile, the analyst also noted that there was also a possibility that Genting Malaysia’s management might take on more borrowings to optimise its capital structure given its net cash position currently.
Kong added, “However, this would also mean that market observers’ highly anticipated bumper dividend from the group is now less likely to materialise. We are forecasting for a dividend yield of 1.9 to 2.1 per cent over the next three years.”
Pending more details from Genting Malaysia’s management, RHB Research retained its fair value at RM3.97 per share, based on sum-of-parts.