Monday, March 8, 2010

GENTING SP : Universal Studio

USS to open on 18 March: RWS will open the Universal Studios Singapore (USS) to the public on 18 Mar 2010, a slight delay from the early-Mar 2010 timeline indicated earlier.
Tickets will start selling on 9 Mar 2010. USS one-day passes range from SGD32-72 (depending on categories ie adult/child/senior; weekday/weekend) - cheapest amongst Universal Studios theme parks globally (Figure 2). USS’ two-day passes range from SGD58-118, higher than Universal Studios Hollywood’s due to the larger physical design and no of rides. USS’ annual passes, however, rank as the most expensive among Asian theme parks (Figure 3), at SGD318-1098.
Although USS ticket price would be at a premium to Disneyland Hong Kong, Ocean Park and Genting Highlands, USS offers an integrated resortsconcept and more rides. The Universal Studios brand has a strong proven track record, with Universal Studios Japan ranked 9th most popular theme
park in the world, and third in Asia with 8.3m attendance in 2008 (11m in its first year of operations).
New original rides to attract visitors. USS will consist of seven zones ie Hollywood, New York, Sci-Fi City, Ancient Egypt, The Lost World, Far them are original or specially designed for USS. We understand most of the rides (>80%) will be opened in the first year (unlikely all on the first day of launch) while the rest to be introduced progressively over the next four years to attract repeat visitors. Among major highlights are the dueling coaster (world’s tallest roller coaster) and Transformer ride (world’s first, expected in 2011). USS is 70% covered, with an eco-cooling system installed to create a more controlled environment.

Universal Studios has promised that this will be the only park it would have in Southeast Asia for the next 30 years and expects to draw in >5m visitors annually (14k/day). However, competition could intensify with Universal Studios opening new themeparks in Dubai and Seoul, Korea(likely Asia’s biggest Universal Studios) by 2012 and 2014 respectively.

Slow start seen for visitor arrivals. The launch of USS should help draw in more mass visitors to RWS. Visitor arrivals have fallen short of management’s expectation of 12m p.a. or 33k/day, having averaged only ~20k/day in the first two weeks of casino’s operations (during the peak Chinese New Year celebration). RWS’ casino may need another 4-6 weeks to fully ramp up to 560 tables and 1300 slots. So far, it has opened 270 tables (50 VIP, 220 mass).
USS’ opening will complete the launch of RWS’ Phase 1 while Phase 2 is expected to complete by 2011. USS should provide RWS a more subtle approach in its marketing and promotional activities in countries where advertising on gaming is banned.

Maintain HOLD call. Although GENS has fallen 31% off its peak and valuations have moved closer to sector average (26x 2011 PE, 14x EV/EBITDA vs sector’s 17x and 12x respectively), we are still maintaining our Hold call and sum-of-parts TP of S$1.07. Potential risk of further earnings downgrade should RWS’ ramp up is slower than expected and Marina Bay Sands (launching on 27 Apr 2010) wrestles more market share than anticipated. We prefer Genting Bhd (Buy/ TP: RM8.80) for cheaper exposure to Singapore IRs and resilient base earnings from Malaysian casino, plantation and power segments.

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