• First overseas expansion
• Minimal near-term impact
• Maintain HOLD with S$1.48 FV

Expanding into South Korea

Genting Singapore (GS) recently announced that it has established a JV with HK-listed Landing International Development Limited (IIDL) to develop and operate an integrated resort (IR) on Jeju Island, Korea. According to GS, the iconic destination will be the island’s largest tourism resort to date, with luxury hotels, a shopping mall, a theme park, villas and apartments, as well as gaming entertainment and other leisure and entertainment facilities.

Estimated cost at US$2.2b

The JV estimates that the total cost for the IR to be around US$2.2b. According to GS, it will subscribe for 8.25m shares in Landing Jeju Development Co (LIDC) for KRW82,500m (S$97.1m); it will also provide shareholders loan totaling an equivalent of KRW82,500m to LIDC by or on the date of completion. Separately, GS will subscribe for 810m new LIDL shares for HK$243.0m (S$39.8m). GS says that it intends to fund the investment using existing cash reserves, which last stood at S$3.9b as of end Sep 2013.

Modest positive but minimal impact now

As the IR will only be operational in 2017, we note that the near-term impact would be quite minimal. However, it does demonstrate the company’s desire to expand overseas, and is also a good endorsement of its branding. In any case, we believe that the bigger impact will come from a potential mega project in Japan (although the timing of such a project is still uncertain).

Maintaining HOLD and S$1.48 FV

As GS will be releasing its FY13 results on 20 Feb, we opt not to adjust our estimates for now. We are expecting GS to show a topline of S$2.96b and an underlying net profit of S$573.5m. For now, we have a HOLD rating and S$1.48 fair value on the stock.

Source: OCBC Research - 11 Feb 2014