Investors in Genting Malaysia will “likely feel relieved” after the company failed to win a provisional 10-year casino concession in Macau, according to Nomura analysts.
In a note issued Monday following the weekend announcement by Macau’s tender committee that the six current concessionaires would all be issued new 10-year concessions from 1 January – with Genting Malaysia subsidiary GMM the only unsuccessful bidder – Nomura’s Tushar Mohata and Alpa Aggarwal suggested investors might not feel as disappointed as company management at missing out on a concession.
“There were two concerns if Genting Malaysia had won the bid,” they wrote, “the risk of a low ROIC investment in Macau given lack of clarity on the residual size of the Macau gaming industry once China emerges from zero-COVID Strategy, after years of crackdown on the sector by Beijing; and funding risk for a large capex commitment and resulting balance sheet pressure on Genting Malaysia and [Genting Berhad] to develop a new Macau resort, and resulting negative FCF in the coming years.”
Despite Genting missing out, Mohata and Aggarwal said most analysts and investors had never factored a potential win into their estimates, with investor focus now able to fully return to the expected recovery in visitation and earnings at the company’s operating resorts. Nomura has maintained a “Buy” rating for Genting Malaysia and “Neutral” rating for parent Genting Berhad.
While Nomura said it was not a total surprise that Genting Malaysia missed out on a Macau concession, JP Morgan analysts stated over the weekend that the company could still pursue a Macau interest by way of either equity investment or a joint venture partnership, pending Macau government approval.
