Maybank Investment Bank has indicated that the potential continuation of two significant casino projects in the US could lead to a substantial increase in Genting Malaysia’s long-term earnings estimates, potentially up to 74%.
Genting Malaysia: Continuation of Two Casino Projects
As initially reported by local news outlets and then by IAG, the New York State Gaming Commission (NYSGC) has reopened the Request for Applications (RFA) process for the allocation of three downstate casino licenses. Genting Malaysia is considered a leading contender for two out of the three casino licenses. These licenses would enable the expansion of its Resorts World New York City (RWNYC) facility by introducing table games. Should this materialize, RWNYC’s underlying net income could reach MYR 610 million, equivalent to approximately US$130 million, according to Samuel Yin Shao Yang of Maybank IB.
That’s not all. The Mashpee Wampanoag tribe has formally requested a meeting with the Taunton City Council to explore the potential revival of the First Light Resort & Casino property situated in Massachusetts.
Cancellation of Investment
In April 2016, Genting Malaysia subscribed to interest-bearing promissory notes issued by the Mashpee Wampanoag tribe to support the construction of the aforementioned project. The company provided financing of US$426.3 million, with agreed interest rates ranging from 12% to 18% per year. It was also stipulated that Genting would operate the casino business for a minimum of seven years, earning 30% EBIT.
However, the investment took a downturn. The firm was compelled to cancel its investment in 2018, resulting in an “impairment loss.” This followed the US Department of Interior (DOI) decision that the Mashpee Wampanoag Tribe could not proceed with its planned casino due to non-compliance with the Indian Reorganization Act, which allows the Tribe to have land in trust for an integrated gaming resort development. Genting also incurred annual interest payment losses of nearly $62 million.
Nonetheless, should the aforementioned promissory notes be revised, Yin noted that Maybank IB’s core net income estimates could rise by approximately MYR 180, equivalent to roughly US$38.5 million annually. In light of these developments, he commented, “Should both catalysts materialize under a ‘blue sky’ scenario, our long-term earnings (FY25) estimates could be raised by 74%, and DCF-TP could be increased by 31% to MYR3.62. The ‘blue sky’ Target Price implies an attractive upside potential of 40%.” Additionally, Yin maintained a “BUY” rating on Genting Malaysia’s stake, currently standing at MYR2.59.
About Genting Malaysia
Established and officially launched in 1980, Genting Malaysia Berhad is headquartered in Malaysia. It underwent restructuring, with Resorts World Bhd taking over Genting Group’s gaming, hotel, and resort operations, including essential assets and goodwill. Genting Malaysia manages various hospitality and entertainment operations, boasting a resort with 10,500 rooms across seven distinct hotels. These facilities include gaming, theme parks, dining, retail outlets, and international shows. Genting Malaysia is known for Resorts World Genting, situated within the Titiwangsa Mountains, bordering the states of Pahang and Selangor in Malaysia, known as Genting Highlands.
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