Despite the termination of the Disney-Fox theme park, Affin Hwang Investment Bank Bhd (AffinHwang Capital) expects Genting Malaysia Bhd (Genting Malaysia) to continue to work on the outdoor theme park even as the management did not provide any details on its plan for the park, reported The Borneo Post.
The opening date, however, is expected to be moved to 2020 from 1H 2019 originally.
“In our view, even without a branded theme park, visitation growth is still sustainable, albeit not as strong as previously forecasted,” it said.
“As an indication, prior to the refurbishment, the ‘old’ theme park managed to attract circa two million to 2.5 million visitors a year…Overall visitation for the first nine months of 2018 (9M18) is up 14 percent year on year (y-o-y), even without the presence of the outdoor theme park.”
Kenanga Research, Kenanga Investment Bank Bhd’s research arm, noted that Genting Malaysia’s share price fell 37 percent since the announcement of Budget 2019 in November, and is expected to drop further as the RM1.83 billion impairment negatively affected sentiment.
The research house revealed that the casino operator’s share prices began to fall when it was slapped with a 10 percent increase in casino duties during the Budget 2019 announcement. Last week’s unexpected termination of the Twentieth Fox Theme Park pushed the share price further to multi-year lows.
“Although the impairment is one-off, we believe this will impact the already fragile sentiment further,” it added.
And while no guidance on earnings before interest, tax, depreciation and amortisation (EBITDA) margins has been provided by management after the upcoming gaming tax hike, it alluded that the current 35 percent margins for 9M18 are unsustainable, said AffinHwang Capital.
“Genting Malaysia will likely have to undergo a cost rationalisation program to lower its costs, while seeking a balance between margins and volume,” said the research firm.
“Thus, we are lowering our margin assumptions for 2019-2020E to 28 percent (from 32 percent), as we believe Genting Malaysia will need to sacrifice margins to remain competitive in the VIP segment. The government has raised the gaming tax on net wins to 35 percent (from 25 percent) from January 1, 2019.”
Image source: The Borneo Post
This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email editorialteam@propertyguru.com.my
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