Maybank Investment Bank said Sunday they could raise Genting Malaysia’s long-term earnings estimates by as much as 74% following news that two key potential casino developments in the United States could be back on the menu.
As per local news reports, the New York State Gaming Commission has now resumed the Request for Applications (RFA) process for three downstate commercial casino licenses, with Genting Malaysia considered a frontrunner to expand its existing Resorts World New York City (RWNYC) property by adding table games. Should this occur, core net profit from RWNYC could climb to MYR610 million (US$130 million), according to Maybank IB’s Samuel Yin Shao Yang.
More surprising is the news that the Mashpee Wampanoag tribe has formally requested a meeting with the Taunton City Council to discuss the potential resurrection of its First Light Resort & Casino development in Massachusetts.
Genting Malaysia had in April 2016 subscribed to interest-bearing promissory notes issued by the Mashpee Wampanoag Tribe in order to help finance construction of the casino project. For its US$426.3 million investment, the company was to be paid interest of between 12% and 18% per annum as well as managing casino operations for at least seven years for 30% of EBIT.
However, Genting Malaysia was forced to write off its investment as an impairment loss in 2018 after the US Department of Interior (DOI) ruled the Mashpee Wampanoag Tribe could not develop its planned casino because it did not satisfy the conditions under the Indian Reorganization Act that allow the Tribe to have the land in trust for an integrated gaming resort development. Genting also forfeited around US$62 million per year in interest payments.
If the promissory notes are written back, Yin said Maybank IB’s core net profit estimates would be boosted by around MYR180 (US$38.5 million) annually.
“Should both catalysts materialise under a ‘blue sky’ scenario, our long-term earnings (FY25) estimates could be lifted by 74% and DCF-TP could be raised by 31% to MYR3.62,” he wrote. “The ‘blue sky’ Target Price implies attractive upside potential of 40%.”
Yin has maintained a “BUY” rating on Genting Malaysia shares, which currently sit at MYR2.59.