Genting Malaysia : Listing of Wynn Macau to support valuations BUY

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Genting Malaysia : Listing of Wynn Macau to support valuations BUY

Maintain BUY with unchanged fair value of RM3.40/share. Valuation-wise, GenM is more attractive. Due to GenM's domestic-centric operations, its casino earnings are less volatile than Wynn Macau's during economic downturns. Volatility in earnings of casinos in Macau is partly reflected in Wynn Macau's 16% YoY fall in revenue and 35% YoY decline in net profit in 1HFY09. In comparison, GenM's leisure and hospitality turnover did not slide in 1HFY09, instead it sustained at RM2.3bil YoY.

GenM's balance sheet is clean as reflected in its net cash of RM5.1bil (US$1.5bil) as at end-June 2009. Capex requirements are minimal - about RM200mil to RM300mil annually. In contrast, Wynn Macau's net borrowings amounted to HK$5.4bil (US$698mil) as at end-June 2009. GenM's earnings are visible and its balance sheet - solid. We believe that the listing of casinos in Macau such as Wynn and Las Vegas Sands may help to narrow GenM's discounted valuations against its peers. As such, we remain positive on the group.

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