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Genting Malaysia's Genting Skyworlds theme park starts technical rehearsals; analysts expect it to be opened by next month

KUALA LUMPUR (Nov 8): Genting Malaysia Bhd (GENM)’s outdoor theme park Genting Skyworlds is one step closer to opening its doors to the public as it starts conducting technical rehearsals.

“We are conducting technical rehearsals for employees and selected guests,” a GENM spokesperson noted on Monday morning in response to The Edge's email query on the matter.

This means selected rides in the outdoor theme park have been opened to employees and some guests.

When asked when the theme park will be opened to the public and how much the tickets will be, the spokesperson said the information will be announced in due time.

Gaming analysts expect the park to be opened to the public by next month "if all goes well" and the tickets “could be priced in the range of between RM150 to RM300”.

When contacted on Genting Skyworlds, Maybank Investment Bank Research's analyst Yin Shao Yang said that on a financial year basis, he expects the theme park to attract 3 million patrons with RM200 average spend per patron.

On earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, he assumed 30% or about 10 percentage points higher than Universal Studio Singapore as Genting SkyWorlds will not pay 20th Century Fox gate royalties but a fixed annual license fee.

“These result in a decent RM180 million EBITDA per annum but are not enough to offset RM330 million depreciation per annum (assuming 10% depreciation rate),” he said.

Yet, he expects Genting SkyWorlds to drive Resorts World Genting (RWG) visitor arrivals growth.

“GENM itself expects Genting SkyWorlds to drive RWG visitor arrivals to 30 million in the long term while we are a tad more conservative at 26 million to 27 million per annum (pre-Covid-19 high: 24 million),” he said.  

Assuming RM150 average mass market gaming revenue per patron and 40% EBITDA margin, he said, the 2 million to 3 million extra RWG visitors per annum relative to the pre-Covid-19 high will accrete RM120 million to RM180 million to EBITDA per annum.  

He also opined that this will have positive implications for GENM’s share price in the lead-up to the opening of Genting SkyWorlds in late 2021 even though it is not a casino.

“We studied the share prices of Southeast Asian and Macanese casino companies before their new casinos opened. In an overwhelming 10 of 12 instances, the share prices of the aforesaid casino companies rallied before opening thanks to excitement over the earnings prospects of their new casinos,” he explained.

He maintained a "buy" call on GENM at a target price of RM3.40.

Meanwhile, TA Securities Research analyst Tan Kam Meng said he expects Genting SkyWorlds to be loss-making during the gestation period but will contribute positively to GENM's gaming business.

He expects Genting SkyWorlds to be opened to the public as early as this month and believes the opening has already been priced in the GENM share price.

“Next catalyst would likely be the reopening of the international border or establishment of a travel bubble, which is expected to be in December,” he told The Edge.

While GENM’s FY22 earnings recovery remains intact, he believes its peers listed on Hong Kong's stock exchange offer much decent valuation now.

“As such, we have a "sell" recommendation on GENM (target price: RM3.19) as we expect foreign funds to return to Macau casino operators when the risk of renewing casino licence subsides,” he said.

GENM initially planned to launch Genting SkyWorlds in the middle of this year, however, the progress was dragged by the movement control order in the country. Up until February this year, the group had invested over US$800 million into the project.

Earlier in August, GENM said in a Facebook post that Genting SkyWorlds is in its final stage of development before its opening.

The group also said in a statement in June, the timely completion of Genting SkyWorlds continues to be a key focus.

“While the group continues to work towards the completion of Genting SkyWorlds outdoor theme park in the third quarter of 2021, the opening date of the park is dependent on developments surrounding the Covid-19 situation and its impact [on] the leisure and hospitality sector in the country,” it said.

At the time of writing, GENM gained two sen or 0.64% to RM3.15. It earlier rose to an intra-day high of RM3.18.

Year to date, the counter has climbed 17.98%.

http://www.theedgemarkets.com/article/genting-malaysias-genting-skyworlds-theme-park-starts-technical-rehearsals-analysts-expect

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