- Maintain BUY on Genting Bhd with a higher RNAV-based fair value of RM11.15/share. We have raised Genting Bhd’s fair value to account for “Resorts World Las Vegas” (RWLV).

- We estimate that RWLV would increase Genting Bhd’s RNAV by RM0.53/share. RWLV’s five-year discounted cash flows (DCF) are forecast at RM1.9bil based on a discount rate of 12% and EBITDA margin of 20%.

- We have assumed an average table win of US$4,500/day and slot win of US$200/day in our calculations. We have also imputed that non-gaming activities would account for 70% of total revenue.

- We believe that RWLV would improve Genting Bhd’s pretax profit by 7% to 11% based on the group’s FY15F numbers and various assumptions. RWLV is expected to commence operations in FY16F.

- RWLV’s potential EBITDA of US$267mil (RM828mil) is smaller than Genting Malaysia Bhd’s (GenM) RM2bil and Genting Singapore PLC’s (GenS) S$1.36bil (RM3.4bil) in FY12.

- Although the casino industry in Las Vegas is not as exciting as Macau, we believe that RWLV would be able to hold its own, aided by Genting Group’s name recognition and database of American and Asian customers.

- According to a Visitor Profile Report by Las Vegas Convention and Visitors Authority, about 84% of the visitors in Las Vegas in 2011 were Americans. The balance 16% comprised foreigners.

- The same report also said on average, visitors in Las Vegas patronised six casinos and gambled in three casinos in 2010. Among those who gambled in 2011, the average gambling budget was US$447.63 (RM1,388). Also, about 63% of the gamblers played slot machines in 2011.

- We believe that Genting Bhd should not face any problems financing RWLV, which is estimated to cost between US$2bil (RM6.2bil) and US$3bil (RM9.3bil).

- Although GenM has a good chance of being Genting Bhd’s joint venture partner due to its experience in managing the racino in New York and database of American customers, there is a possibility that GenS could also come into the picture.

- This is because GenS needs to find investments to partly offset the interest of 5.125% being paid to the perpetual bondholders. The coupon payments amounted to S$92.7mil in FY12. GenS is currently eyeing casino opportunities in Japan, which could cost up to US$10bil.

Source: AmeSecurities