GENTING HONG KONG’S management was in town for a roadshow this week. Its president, David Chua, along with Kingson Sian, president of Resorts World Manila, and Andrew Tan, chairman and CEO of Alliance Global Inc, one of Philippines’ largest conglomerates, gave presentations to broking houses and met up with dealers and investors.

Opened in Aug 2009, Resorts World Manila is a 50:50 joint venture between Genting Hong Kong and Alliance Global and is only 55% completed. Home to five-star Marriott Hotel Manila and the 172-suite Maxims Hotel, RWM is a five-minute drive away from the soon-to-be-open Ninoy Aquino International Airport’s Terminal 3. Another Remington Hotel is targeted to open in the first quarter of 2011. Upon completion, the total number of hotel rooms in RWM is expected to hit 1,300. A retail mall was completed in June and is likely to be operational by the end of the year.

 

When completed, RWM will also have three levels of casino space, says Chua. To date, only 200 tables and 1,200 slot machines are operational. By the end of the year, 300 tables and 1,300 slot machines should be up and running. Eventually, RWM will have 2,000 tables and 7,000 slot machines.

 

Already, 2.5 million visitors have walked through the complex, Chua adds. Although 4.3ha of the 7.8ha site has been developed, the total cost of building is estimated to be US$550 million ($738 million). That’s is a fraction of what Genting Singapore spent on Resorts World Sentosa.

 

UOB Kay Hian Research estimates that the 50% stake in RWM contributed about US$10 million to Genting Hong Kong’s 1H2010’s results. The company announced EBITDA for 1H2010 was US$50.5 million, up some 84.3% year-on-year. Total comprehensive income for the six months was US$15.4 million, a marked contrast to the US$57.9 million loss recorded a year ago.

 

Genting Hong Kong also operates a cruise business in Asia and owns a 50% stake in Norwegian Cruise Line.

 

Chua claims the cruise business is doing better despite the opening of the two IRs in Singapore, and that NCL’s business has reached an “inflection point”. Superstar Virgo, the cruise ship based in Singapore, is attracting passengers with new destinations, Chua says.

 

The Superstar Libra is also packed, he adds. According to UOB Kay Hian, NCL’s operations are turning around because of last year’s stringent cost-cutting efforts. NCL’s numbers was further helped by stronger ticket pricing and booking trends, UOB Kay Hian points out. Its occupancy rates were said to have inched closer to record levels, the broker says, adding, “This is indeed a positive surprise for us.”

 

UOB Kay Hian also points out that the cruise business’s Taiwan routes have turned a profit of US$3-4 million from a loss of US$5 million a year ago. “Efforts in Taiwan serve to position the group to explore land-based casino opportunities going forward,” UOB Kay Hian states in a recent report, “On the macro front, we learnt that a draft legislation is expected to go to the national assembly by year-end, followed by one or several referendums to seek local residents’ approval for the opening of casinos on the outlying islands... It was disclosed that a legal firm and a consultant firm has been appointed by the Ministry of Transport to spearhead efforts to bring about Taiwan’s first integrated resorts (IRs).”

 

According to the report, the EV/EBITDA is 19-20 times, which is rich. Compare this to the 11 times EBITDA that Genting Singapore sold Genting UK to Genting Malaysia, and the sector average of nine times, UOB Kay Hian says. But, of course, that does not fully reflect the potential of RWM. Genting Hong Kong last traded at 44 cents, up 69% year to date.

 

The STI (3,022) remains resilient following the strengthening of some medium-term indicators. However, the peaking of the short-term indicators this week could leave the market vulnerable to at least a temporary retreat. Watch for support first at 3,000 and then at 2,948 at the 50-day moving average. An earlier break above 2,900 indicated a target of 3,120. While bullishness pervades, the focus is on situational counters.