Maybank Kim Eng analyst Yin Shao Yang believes that Genting Singapore has a “good chance” of winning the license for the Yokohoma integrated resort (IR), which is current going through the request for proposal (RFP) process.
Yin says the Yokohama IR could potentially generate gross gaming revenue of US$7 billion ($9.3 billion) annually, comprising US$5.8 billion from locals and $1.2 billion from tourists.
“We estimate that the Yokohama IR will generate US$2.7 billion in net profit per annum and is worth US$5.4 billion, which translates into substantial earnings and valuation upside for Genting Singapore,” Yin aadds in a May 19 research note.
Yin says value accretion to Genting Singapore will depend on its shareholding in the company that may eventually construct and operate the Yokohama IR. Based on a hypothetical 40% stake, he estimates earnings and value accretion will still be a substantial $1.4 billion, or 24 cents per share.
SEE:Broker's Digest: SPH, Genting Singapore, OCBC, Parkway Life REIT, UMS Holdings
Yin’s sources in Japan indicate that Genting Singapore is well-positioned to win the RFP by summer. “We opine that this expectation is not without merit as Genting Singapore scores highly in promoting tourism, management and financial ability and responsible gambling initiatives relative to the other Yokohama IR RFP respondents,”he says.
However, Yin cautions that potential risks remain, namely in the event that an anti-IR Yokohama mayor is elected on Aug 22.
For now, he has kept his ‘hold’ rating on Genting Singapore with an unchanged target price of 86 cents.
As at 4.52pm, shares in Genting Singapore are 0.5 cents or 0.64% higher at 79 cents.
