Analysts have mixed views on Genting’s land purchase in Florida

Tuesday May 31, 2011

By LEE KIAN SEONG

PETALING JAYA: Genting Malaysia Bhd's land acquisition in Miami, Florida for US$236mil received mixed reactions from analysts while the move is seen as the way to diversify its earnings base and spur growth going forward.

ECMLibra Investment Research viewed the move positively given the choice location of the waterfront property, adding that Florida attracted up to 82.3 million visitors in 2010, of which 87% were local visitors.

“The announcement has made no mention of casino operations but we view that the announcement will be in due course as licences would be required from the Miami-Dade County,” it said in a report yesterday.

Reported in the South Florida Business Journal, Resort World Miami (RWM) president Mike Speller said Genting Malaysia would fund the US$2bil development cost of the project without stating the funding details.

Kok Thay ... ‘Downtown Miami has experienced dramatic residential and commercial growth in recent years.’

 

CIMB Research is neutral on Genting Malaysia's acquisition and the research house thinks that the deal positions Genting Malaysia to capitalise on the potential liberalisation of “resort-style” gaming in Florida.

It pointed out that there was a question mark over whether the Florida state government would liberalise such gaming in the state.

“This purchase, however, is sizeable, indicating the group's confidence in the success of the mixed development project, in our opinion,” it said.

CIMB left its earnings projections unchanged, pending more details on the acquisition.

“Assuming bank borrowings of US$200mil (85% of total price), we estimate that its net cash will fall by about 33% to RM1.5bil. The total price accounts for less than 1% of the group's shareholders' equity,” it said.

HwangDBS Vickers Research said: “While it is still early to assess earnings impact for RWM, we do not expect any meaningful contribution over the next two to three years. Genting Malaysia's foray into the United States, if successful, will help diversify earnings base and spur growth.”

Genting Malaysia announced last Friday that its subsidiary Bayfront 2011 Property LLC had purchased 13.9 acres in Miami for US$236mil, with plans to build a mixed-use development.

The land includes the building currently housing The Miami Herald Media Company and an adjacent parking lot.

It said in a press release that it was working towards developing a comprehensive master plan for RWM, as the development would be called, which would include hotel, convention, entertainment, restaurant, retail, residential and commercial facilities.

The project aims to capitalise on Miami's standing as one of the world's leading tourism hubs.

Its chairman and chief executive Tan Sri Lim Kok Thay said: “Downtown Miami has experienced dramatic residential and commercial growth in recent years, and we believe the addition of a large-scale mixed-use and entertainment complex will be a welcomed addition, further elevating the area's status as a global destination.”
The acquisition is an integral step for Genting Malaysia as it seeks to expand internationally in the leisure, hospitality and entertainment industry.

The envisioned RWM represents Genting Malaysia's second venture into the United States, after Resorts World New York at the historic Aqueduct Racetrack in the city of New York.

 

Singapore boosts Genting’s 1Q net income

Written by Chua Sue-Ann  
Friday, 27 May 2011 12:10

KUALA LUMPUR: Genting Bhd’s 1Q earnings tripled from a year ago even as stronger numbers at Resorts World Singapore (RWS) and its Malaysian plantations more than made up for softer takings from its Genting Highlands resort.

Net income for the quarter ended March 31, 2011 jumped 254.6% to RM824.18 million from RM232.4 million a year ago, while top line rose 57% to RM4.89 billion over the same period.

There may still be a delay in the completion of the second phase of RWS, Genting said in a filing with Bursa Malaysia yesterday. However, it said in a statement accompanying its results that the issue is being “addressed” and resources have been allocated “to catch up with the schedule”.

Bookings for Singapore in 2Q “continue to be encouraging and RWS looks forward to a strong holiday season”, it added.

For Malaysia, while competition for casino dollars remains strong, Genting Malaysia is “cautiously optimistic” of performance at its hilltop resort and will continue to focus on yield management strategies. “[We] will also step up efforts to tap into the regional growth of the premium players business,” it said.

Separately, Genting Malaysia said it will continue to leverage on established links with its businesses in Asia to boost takings at its London casino properties, even as the UK’s economy continues to be challenging.

“The group has embarked on repositioning its product offering in respect of its casino properties outside London,” it said.  Already, numbers have improved quarter-on-quarter as the UK business reported a RM60.1 million profit against a RM2.1 million loss in 4QFY10.

Genting Malaysia also said the construction of its US Resorts World New York gaming and entertainment hub continues to make steady progress towards the opening of the first phase scheduled in late 2011. It booked RM13.4 million construction profit from the progressive development of Resorts World New York during the quarter.

Genting rose 16 sen to close at RM11.10 yesterday while Genting Malaysia ended flat at RM3.52.

KNM wins US$72m contract in Uzbekistan

Written by Financial Daily  
Friday, 27 May 2011 12:06

PETALING JAYA: KNM Group Bhd yesterday won the bid for a US$71.63 million (RM217.8 million) contract for the development of a documentation and equipment supply facility “booster compressor station” at the Khauzak site in the Republic of Uzbekistan.

The job was secured from Lukoil Uzbekistan Operating Co for a duration of 24 months from the date of commencement of contract and subject to contract signing.

KNM also announced that it recorded a lower net profit of RM19 million for 1QFY11 ended March 31, versus RM40.3 million previously. This was due to a lower tax writeback during the quarter.

Nonetheless, revenue for 1Q rose 10.6% y-o-y to RM413 million while operating profit also increased to RM16.8 million from RM11.3 million a year ago. The group attributed the better operating performance to higher revenue recognised and better margins.

Genting heads for Miami

KUALA LUMPUR: Tan Sri Lim Kok Thay, head of the Genting group is on a roll. Emboldened by Resorts World Sentosa’s (RWS, by Genting Singapore plc) raving success in Singapore in spite of the presence of Sheldon Adelson’s Marina Bay Sands in the tiny city state, Lim is taking another battle against the US casino magnate halfway across the world to sunny Miami, Florida.

Last week, Lim’s Genting Malaysia Bhd bagged for US$236 million (RM713 million) a 13.9-acre tract of waterfront land in northern downtown Miami to be used for a mixed development that would include hotels, restaurants, residences, retail shops and a convention centre. But there’s little doubt his people will do all they can to also get a gaming licence there. Lim isn’t alone.

Genting group, Wynn Resorts and Adelson’s Las Vegas Sands Corp this year hired a stable of lobbyists to push through a bill that would give them the chance to bid for a licence to operate an exclusive casino resort in any of the five cities in Florida — Miami, Jacksonville, Tallahassee, Tampa and Orlando —  where Walt Disney World is located — according to a write-up posted on The Miami Herald’s website. [The land Genting Malaysia bought includes the building which houses The Miami Herald Media Company.]

The lobbying began since the Seminole Tribe of Florida won exclusive rights to offer slot machines as well as other casino favourites like black jack and baccarat within tribal areas two years ago. Giants of the casino world have reportedly been lobbying for a chance to set up shop in one of the US’ most popular tourist destinations, The Miami Herald said. The existing revenue-sharing model where the tribe pays the state at least US$150 million a year through 2015 will stop if additional gambling were to be authorised by the state, the write-up read.

To win, lobbyists will need to prove the economic good to the state and its people far exceeds the potential social impact from a possible rise in negative activities associated with gaming. In his 30-page letter vetoing a US$400,000 study on the feasibility of bringing casino resorts to Florida, Governor Rick Scott did say he thought it “important to have a full consideration of the positive economic impact, the costs that may result from this policy, and the impact on current gaming in [the] state” — leaving the door open for the casino lobbyists.

Genting head for Miami

Singapore’s success story in transforming itself into an attractive business and leisure destination with the two casino resorts may just boost the hand of these lobbyists. The city-state’s casino gamble had thus far paid off handsomely with record high tourist arrivals that helped fuel Singapore’s enviable 14.7% GDP growth last year and is expected to continue aiding growth this year. PricewaterhouseCoppers had estimated Singapore’s gaming market at S$2.8 billion (RM6.9 billion) last year. Fuller state coffers from gaming-related receipts allowed for a 20% tax rebate on all residents’ taxable income last year and other benefits for citizens ahead of its watershed elections earlier this month.

Even without a casino licence just yet, Genting Malaysia sees the Miami land acquisition as “an integral step” in its pursuit of expanding internationally in the leisure, hospitality and entertainment industry. “The envisioned Resorts World Miami represents Genting Malaysia’s second venture in the US, after Resorts World New York at the historic Aqueduct Racetrack in New York City,” Genting said in a statement last Friday.

Scheduled for opening by end-2011, some three months ahead of schedule, Resorts World New York — the first casino in the Big Apple — will reportedly have 4,525 video lottery terminals, a seven-outlet food court, the 360° bar, entertainment space as well as grab-and-go food outlets in its initial phase. A sky bridge connecting a train station to the casino entrance, initially scheduled to complete in spring 2012, has been fast-tracked to complete by the end of this year.

Back in Singapore, work has been accelerated to ensure Phase 2 of RWS is back on track for completion by year-end, Lim told reporters last Friday. With the opening of new attractions, starting with the maritime museum in 3Q, RWS was also confident of attracting over 16 million visitors this year, up from last year’s 15 million, Lim reportedly said. Other attractions under phase 2 of RWS include an oceanarium and a water theme park.

To be sure, RWS’ non-casino attraction Universal Studios Singapore — which is next to its casino — was already bringing people like former American Idol judge Paula Abdul to the city state for the first time in two decades. She was among celebrities like Asian superstars Jet Li, Maggie Cheung and Vicki Zhao to walk the red carpet at Universal Studios Singapore’s grand opening last Friday evening along with some 1,600 guests.

Not everything that the Genting group has touched has turned to gold, though. Its five casinos in London and 38 others in the UK, for instance, have yet to be a big money spinner, though efforts have been underway over the last year to revamp the operations there. Still, the Genting Highlands hilltop casino resort in Malaysia (under Genting Malaysia), built by Lim’s father, the late Tan Sri Lim Goh Tong, continues to remain strong despite the opening of Genting Singapore’s RWS and Adelson’s Sands in Singapore since early 2010.

As Genting group’s cash pile from the Malaysia and Singapore casinos grows, some investors think it should return more cash to shareholders instead of putting money in unrelated pursuits or lofty projects that may take some time to pay off. Some analysts are hopeful of higher dividends but aren’t betting on that happening anytime soon though. After all, if it is the likes of Adelson that Lim’s genting Group is girding itself up for battle with in Miami, it would need all the ammunition it can get.

Genting Bhd 1Q net profit surges 254% to RM824.17m from yr ago

Written by Joseph Chin of theedgemalaysia.com
Thursday, 26 May 2011 19:38

KUALA LUMPUR: GENTING BHD []’s net profit surged 254% to RM824.17 million in the first quarter ended March 31 from RM232.43 million a year ago when the net profit then was affected by net impairment losses.

It said on Thursday, May 26 that revenue rose 57.2% to RM4.89 billion from RM3.11 billion while earnings per share were 22.25 sen compared with 6.29 sen.

“The group’s profit before tax in 1QFY11 was RM1.9 billion compared with RM200.0 million in 1QFY10,” it said.
Genting Bhd said in the 1QFY10, the group’s profit before tax included some significant one-off items, namely a net impairment loss of RM1.303 billion and a net gain on dilution of RM436.3 million from the dilution of the company’s shareholding in Genting Singapore PLC when convertible bonds that were issued by Genting Singapore were fully converted into new ordinary shares of Genting Singapore.
“The adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was RM2.4 billion in 1QFY11 versus RM1.4 billion in 1QFY10, an increase of 74%,” it said.
It said the leisure and hospitality division remains the key revenue and earnings contributor to the group, with a significant increase in contribution in 1QFY11 from Resorts World Sentosa in Singapore.
RWS posted strong revenue growth and experienced good win percentage and gaming volume in 1QFY11, as well as saw steady growth in Universal Studios Singapore and the hotels.

KNM skids to RM2.15, lowest since mid-December

Written by Joseph Chin of theedgemalaysia.com
Friday, 27 May 2011 15:52

KUALA LUMPUR: KNM GROUP BHD [] came under selling pressure in late afternoon on Friday, May 27, with the shares falling to a low of RM2.15, the lowest since Dec 13, 2010.
At 3.38pm, it was down 38 sen to RM2.15 with 73.09 million shares done.

The FBM KLCI rose 6.33 points to 1,547.27. Turnover was 635.06 million shares done valued at RM1.09 billion. The broader market displayed signs of weakening further, with 467 losers to 251 gainers and 299 stocks unchanged.

RHB Research Institute said KNM 1Q earnings were significantly below expectations due to legacy contracts.

“We have downgraded our call on the stock to Underperform based on 12x target PER (down from 15x) on revised FY12 EPS of 19 sen,” it said.

In the 1Q, its earnings fell to RM19.01 million from RM40.33 million a year ago.
OSK Research said KNM’s 1QFY11 results were below consensus and its expectations, making up 8% and 9% of the FY11 forecasts respectively.

“Overall, although there was improvement in its overall business activities, these remained slow, resulting in the company making a minimal PBT of only RM6.3 million, which was quite close to the RM6.9 million generated in 4QFY10. Also, its performance this quarter was boosted by the utilisation of tax incentives from Borsig’s acquisition amounting to RM12.8 million (4QFY10 of RM14.0 million),” it said.

Written by Joseph Chin of theedgemalaysia.com    Friday, 27 May 2011 09:11

KUALA LUMPUR: Shares of KNM GROUP BHD [] fell in early trade on Friday, May 27 after its first quarter earnings came in below expectations.

At 9.07am, it was down 20 sen to RM2.33 with 1.90 million shares done.

The FBM KLCI rose 6.13 points to 1,547.07. Turnover was 31.24 million shares valued at RM31.13 million. There were 99 gainers, 72 losers and 99 stocks unchanged.

ECM Libra Research said KNM’s 1QFY11 net profit came in significantly below house and consensus expectations. Profit of RM19.4m made up less than 10% of full year estimates.

“The reason for the poor showing is that the group is still going through their older orders, which were low margin orders secured over FY10 (excluding the turnkey projects). Management had earlier guided on softer results in 1H11 hence this comes as no surprise.

“On a positive note, revenue growth indicates increasing utilisation which we gauge should be at roughly 70% from 60% in FY10,” it said.

http://www.theedgemalaysia.com/business/187238-knm-falls-on-weak-1q-earnings.html

Lower enrolment hurts Masterskill net profit

Wednesday May 25, 2011

PETALING JAYA: Nursing school operator Masterskill Education Group Bhd posted a 15.3% fall in net profit to RM22.58mil for the quarter ended March 31 compared with the same quarter a year ago due to lower enrolment of students and higher operating overheads.

The company’s revenue was down 12.6% to RM73.68mil after the number of student intakes for the quarter under review was cut to one from two compared with the corresponding quarter.

Masterskill said in an announcement to the stock exchange yesterday that the second intake of the year was deferred to the second quarter due to the late announcement of SPM results.

It added that the higher overheads were mainly due to an increase in depreciation because of the company’s expansion, which was accompanied by an increase in staff costs to support growth and expansion.

 

The company said in a separate announcement that it had signed a memorandum of agreement with Social Security Organisation to allow students to use the facilities and equipment at the latter’s rehabilitation centre in Alor Gajah, Malacca.

Earlier last month Masterskill entered into a subscription agreement with the controlling shareholder of soon-to-be-listed PT Sejahteraraya Anugrahjaya Tbk, the owner of Mayapada Hospital, to acquire a 1.31% stake in the latter.

Besides the stake, the company together with its chief executive officer Datuk Seri Edmund Santhara also entered into an agreement to form Universitas Masterskill-Mayapada.

Masterskill also announced late last month that it had entered into an agreement with Australia’s Newcastle University to offer business programmes.

Masterskill closed five sen lower at RM2.12 yesterday. Since its listing in May last year, the counter has fallen 44.21%.

 

CIMB Research keeps Buy on Masterskill, TP RM4.48

Written by theedgemalaysia.com

Wednesday, 25 May 2011 08:36

KUALA LUMPUR: CIMB Equities Research is keeping its Buy call on Masterskill Education Group Bhd and RM4.48 target price. It said on Wednesday, May 25 that although Masterskill’s annualised 1Q11 core net profit made up 76% of its full-year forecast and 77% of consensus, the results were largely in line as subsequent quarters should be stronger. “We were not surprised by the weaker showing at both the top and bottom lines as it arises from timing issues in student intake following the delayed announcement of school-leavers’ results. Although EBITDA margin shrank YoY, it was a respectable 41.2%, which is not too far from our full-year forecast of 43%. “We make no changes to our forecasts, BUY call and RM4.48 target price, still pegged to 13.1x CY12 P/E or a 10% discount to our target market P/E of 14.5x. Potential re-rating catalysts include (i) a continued recovery in investor sentiment, and (ii) preference for defensive plays, backed by Masterskill’s 8.2% dividend yield,” it said.