Maintain BUY call and MYR3.38 DCF-based TP
We attended a preview of Genting SkyWorlds organized by GENM. All in all, we rate GS highly. Special mention goes to the Independence Day Defiance attraction. Even though we expect GS to be loss-generating due to heavy depreciation, we are confident that it will draw the crowds (whether gaming or non-gaming) and be net positive for GENM. We maintain our estimates, BUY call and MYR3.38 DCF-based TP on GENM.
Genting SkyWorlds to open soon
Channel checks tell us that the c.USD800m (MYR3.3b) GS will likely open between mid and late Feb 2022. It sits on 26 acres and will eventually offer 26 attractions across 9 zones (Fig. 2 to 11). Though its website lists 19 attractions, (Fig. 1), 13 were available for preview. GS will open more attractions progressively. GS’ capacity is 20k visitors daily but will open at 50% capacity. Most of the signs at GS are also in simplified Chinese, to cater to Mainland Chinese tourists in the long run. Patrons can also download the GS app (Fig. 12) and virtually queue for rides.
Expect GS to be loss-generating…
On a FY basis, we expect GS to attract 3.0m patrons and MYR200 average spend /patron. The former will see GS ranked as the second most visited theme park in ASEAN (Fig. 13) while the latter is 20% lower than Universal Studios Singapore’s (USS) at c.SGD80 (MYR250). On EBITDA margin, we assume 30% or c.10ppts higher than USS as GS will not pay 20th Century Fox gate royalties but a fixed annual license fee. These result in a decent MYR180m EBITDA p.a. but are not enough to offset MYR330m depreciation p.a. (assuming 10% depreciation rate).
… but overall +ve for GENM
Yet, we expect GS to drive RWG visitor arrivals growth. GENM itself expects GS to drive RWG visitor arrivals to 30m in the long term while we are a tad more conservative at 26-27m p.a. (pre-COVID-19 high: 24m). Assuming MYR150 average mass market gaming revenue/patron and 40% EBITDA margin, the 2-3m extra RWG visitors p.a. relative to the pre-COVID-19 high will accrete MYR120m-MYR180m to EBITDA p.a.