The biggest news that came out of corporate Malaysia this week was Genting Malaysia’s disposal of its Miami land for US$1.225 billion which equals to over RM5 billion, with the company pocketing some US$967 million or RM4.3 billion.
Kenanga Investment said it views this positively as the land has been left idle since its acquisition, and the disposal proceeds could be used to fund other projects, particularly, if GENM is to secure the downstate New York full casino licence. The house maintains forecasts, TP of RM3.56 and OUTPERFORM call.
To recap, GENM acquired the Miami Herald land (excluding parcel D) in May 2011 at USD246m and parcel D at USD13m in May 2017. Currently, parcels A, B and D are vacant lands while parcel C has a total rentable area of 20,139 sqft but is untenanted. The total market value for these four parcels of land is USD1.223m while its net book value is USD259m. Upon completion, GENM is expected to register a disposal gain of USD967m or c.RM4.289b, c.400% over its cost of investment.
The land was left idle since the state of Florida does not allow a casino to operate on non-native American land, there is no immediate value in holding onto the Miami Herald land further.
Moving forward, pending the completion of the disposal, there is no change in the FY23F/FY24F earnings forecasts. Based on FY22A proforma effect, gearing is expected to decline to 0.76x from 0.96x post disposal. Kenanga believes key earnings driver RWG will benefit from the reopening of the economy as well as international borders, especially China, which should usher in the return of foreign tourists. The stock is liked for earnings recovery play.
