HwangDBS Vickers Research is maintaining its Buy call on Resorts World at RM2.05 as the market is pricing its resilient gaming business at only 6.9 times 2010 price-to-earnings (ex-cash).
“Our RM2.60 target price is based on 14.2 times 2010 PE (similar to SARS level), supported by RM2.55 sum-of-parts value,” it said in a research note issued on March 26.
The research house said that following its gaming sector report “Emerging Value” on March 24 where it upgraded Resorts to Buy (from Hold), it saw little risk of 19.6%-owned Star Cruises calling for a rights issue now.
HwangDBS Vickers Research said this was due to cancellation of orders for one new vessel (US$1 billion savings) and also minimal amount due for 50% stake in Travellers International (US$50 million).
It added the Newport City (Philippines casino project) was expected to be completed by end of 2009 while Padgor City and Macau projects are still at early development stages, and also NCL's improving net gearing (to 153% from 253%).
“Hence, the implied 60% discount the market ascribed to Resorts’ net cash is excessive, in our view,” it said.
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