STOCK FOCUS OF THE DAY
Genting Bhd : Longer-term
story
HOLD
Maintain HOLD on Genting Bhd with an unchanged RNAV-based
fair value of RM9.86/share. We believe that Genting Bhd's current valuations
have already reflected the earnings improvements of the subsidiaries in FY17F
and FY18F. Genting Bhd is currently trading at FY17F fully diluted PE of 21.7x
and FY18F fully diluted PE of 19.9x. In comparison, Genting Malaysia's FY17F
and FY18F PEs are 17.2x and 15.5x respectively. The Macau casino companies are
presently trading at simple average FY17F PE of 23.7x and FY18F PE of 19.9x. We
reckon that Genting Bhd's long-term prospects are more interesting. The first
phase of Genting Bhd's Resorts World Las Vegas (RWLV) may open in FY19F. We
estimate RWLV's annual EBITDA to be more than US$200mil, which may increase
Genting Bhd's earnings by 10%. RWLV could improve Genting Bhd's RNAV by more
than RM0.50/share.
We do not think there would be a rights issue or private
placement to finance the Us$3bil development of RWLV. We reckon that Genting
Bhd would be able to finance RWLV with project financing. The debt portion of
the RWLV project is expected to cost US$1.5bil to US$1.6bil (RM6.7bil to
RM7.1bil). We estimate Genting Bhd's gross cash at RM3.6bil at the company
level as at end-December 2016. In January 2017, Genting Bhd raised guaranteed
notes amounting to US$1bil. Closer to home, there is a possibility that Genting
Group may be interested in Macau if the government opens up the renewal of the
casino licences to open bidding. It is not known if there would be a new casino
licence up for tender. MGM China's and SJM Holdings' casino concessions are
expected to expire in year 2020 while the balance is anticipated to expire in
year 2022. Developing a casino in Macau is expected to be costly. The
development of Wynn Palace cost US$4.2bil in total while Parisian Macau cost
about US$2.7bil.
Others :
Berjaya Food : From venti to
tall
HOLD
STOCKS ON THE RADAR
Hexza Corporation,Censof Holdings,OCK Group,Careplus
Group
ECONOMIC HIGHLIGHTS
Indonesia : Exports will benefit from firm commodity prices
and low base
US : A balanced view from the Fed
NEWS HIGHLIGHTS
Power Sector : Malakoff unit issues RM800mil sukuk wakalah
Technology Sector : MyEG to expand to the Philippines in
first overseas venture
Construction Sector : Ekovest set to clinch the Blue River
Project
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