Japanese brokerage Nomura says Malaysia’s only legitimate casino operation, Resort World Genting’s “healthy” visitor growth and core revenue growth should remain “resilient” for the full calendar of 2019. In a note on Monday, the brokerage expected property operator Genting Malaysia Bhd to post 8% revenue growth for the year.
“We expect the next phase of Genting Malaysia’s growth to come from its capital investment, which has become the company’s growth cash cow and increased visits and revenue,” analysts Tushar Mohata and Alpha Aggarwal wrote.
They added: “While EBITDA [earnings before interest, taxation, depreciation and amortisation] growth is likely to shrink due to the recent punitive game tax hike and theme park dispute, we believe the stock has already factored in factors above negative.”
According to Malaysia’s government budget plan in November, casino licensing fees paid by Genting Malaysia for its resort world genting facilities will increase from $120 million ($29.2 million) to $150 million ($150 million) per year, while casino tariff rates will increase from 25% to 35% of total gaming revenue. Authorities also said gaming console tariffs will increase from 20% to 30% of total collection.
Resort World Genting (pictured in file photo) was expected to open a Fox-branded Hollywood-focused theme park this year, but the facility is now the centerpiece of a legal dispute in U.S. courts. The park was supposed to be a central part of the Resort World Genting reorganization, which began in December 2013.
“[The theme park] could take a few quarters to operate. Given that the theme park is locked in a legal dispute with Fox, we believe it could take a few quarters (likely 2020) before the revamped theme park can operate,” Nomura said in a note Monday. “Other designs are built on Fox’s intellectual property rights, and given the final stages of completion, we believe it may not be easy to scrub the IP quickly and run the park on regular or other brand IPs. (Management should choose this while the legal dispute is ongoing.”
Last week, it was revealed that Genting Malaysia had filed for judicial review over another decision by the Malaysian government that it considers to be hurting its interests. It is concerned about what it said was the casino business that delayed some tax benefits promised over a multibillion-dollar overhaul of the complex.
Nomura analysts said in a note Monday that there were positive factors that could help drive the performance of Resort World Genting. “The indoor theme park (Skittropolis Funland) has officially started operations with 13 of the 21 rides, and we believe this will boost visits,” they said.
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