Genting SP

Genting SP: announced a 50/50 JV agreement with China property/ industrial company Landing International (582 HK) to build a new integrated resort on Jeju Island in Korea. The first phase of development of the 232 ha site is small, with a total project investment of $394m, but may grow to US$2.2b eventually if all stages are developed. The Jeju gaming market is currently relatively small, as only foreigners are allowed. There are 8 casinos in Jeju Island now, all small with typically 20-40 tables and 10-50 slot machines. Combined net revenue has grown at 18% CAGR to US$134m, while Chinese visitors to Jeju have grown at 41% CAGR to account for 78% of the 2.3m foreign visitors. With Spore’s gaming market maturing, Nomura believes that GENS’ deployment of its cash reserves in overseas ventures offers a much awaited growth catalyst. The street estimates for the property to open in 2017, with maiden EBITDA contribution in 2018. CLSA estimates the project will have an NPV of $910m and generate an IRR of 18.4% adding $455m or $0.04 per share to GENS’ valuation. The full US$2.2b project would add $0.13-0.19 per share. Latest broker ratings as follows: CLSA maintains Buy, upgrades TP to $1.77 (from $1.73) Nomura upgrades to Buy from neutral, lifts TP to $1.62 (from $1.52) Credit Suisse maintains Outperform with TP $1.75 Deutsche maintains Buy with TP $1.63