Artist's impression of theme park at Resort World @ Sentosa.
THE GENTING GROUP will be the biggest winner and we reiterate our Buy recommendation - so said Merrill Lynch last week in a report evaluating how different sectors stand to gain with the opening of the integrated resorts.
However, FY09 may be the third year in a row that SGX-listed Genting International loses money. This will change when its integrated resort opens in Sentosa next year.
The broker believes the integrated resort will start contributing to Genting’s revenues in 2H10, turning around pretax loss of S$148.5 million in FY08 as well as expected losses this year.
With operations in Australia, USA, Malaysia, the Philippines and UK, the leading integrated resort developer has lost one cent per share in FY08 and 5 cents in FY07.
Merrill Lynch's and other brokers’ consensus on Bloomberg is that Genting International will lose another 2.5 cents per share for FY09 before making half a cent per share for FY10.
Resort World @ Sentosa’s much-hyped amenities are a casino, four hotels and a 7,300-seat ballroom, as well as the first Universal Studio theme park in Southeast Asia will soft launch in the first quarter of next year.
The movie theme park will transport visitors into 6 unique movie settings and simulate experiences of movie protagonists.
But be it Resorts World @ Sentosa or Marina Bay Sands, whoever opens doors first will claim first mover advantage. After all, some gamblers may not visit both casinos, deterred by the prospect of paying entrance fees twice.
Merrill Lynch estimates the gaming market in 2010 to be about S$3-4 billion.
Based on this, it projects the integrated resort’s total earnings before interest, taxes and depreciation (EBITDA) will reach S$720 million by 2011, of which gaming will contribute 85-90%.
The integrated resorts are expected to increase tourist arrivals to Singapore by 25% from a forecasted 9 million visitors in 2009.
Of this, Genting expects Universal Studios to attract about 5 million visitors a year, comprising of a 60:40 foreigner to local ratio.
These estimates appear conservative, considering that Hong Kong’s Disneyland has consistently achieved 4 to 5 million visitors a year since opening in 2005.
Genting International’s stock price last closed at 61 cents per share on Friday.
Integrated resorts are a wildcard with a divergence in analyst views on Genting.
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