KUALA LUMPUR: Genting Malaysia Bhd’s decision to close its outdoor theme park this September to make way for a spanking new, RM400mil 20th Century Fox park, expected to open in 2016, has been positively greeted by analysts, despite acknowledgment that there were some risks to earnings.
Alliance Research is maintaining its Buy call on the stock with the target price unchanged at RM4.25, pending further clarifications from management.
It described the move as one that involved “short-term pain for long-term gain”, and said since non-gaming activities contributed less than 10% to the groups’s leisure and hospitality revenues, the theme park’s closure would not have a significant impact on earnings.
“We are optimistic of the group’s major initiation to revamp its theme park together with a renowned global entertainment giant. This is because the refurbished theme could attract more visitations and indirectly drive its domestic gaming revenue.
“On the other hand, it will also enhance the profile of its domestic casino resort and support the group’s strategy to grow its VIP segment,” Alliance Research said.
Hong Leong Investment Research is also optimistic about the move, describing it as Resort World Group’s move to elevate itself to a higher level of competitiveness in the face of stiffer competition.
“The new theme park would definitely pave the way for continued business growth and ensuring RWG remains a relevant and exceptional destination resort both locally and internationally.
“We expect the theme park to perform exceptionally well during the first two years of operations (FY16-17) due to novelty effects,” HLIB Research said, as it maintains its Hold call on Genting Malaysia whilst revising the target price upwards to RM4.25 from RM4.10.
PublicInvest Research, which is maintaining its Neutral call with target price at RM4.08, said it viewed the development positively, since many of the current theme park rides were fairly dated and an overhaul was timely to increase the appeal of Resorts World Genting (RWG) as a holiday destination and boost its mass market volume.
“We also believe the new theme park will drive average spending per visitor, as ticket prices are likely to be higher,” it said.