PETALING JAYA: The settlement of the legal dispute between Genting Malaysia Bhd and Twentieth Century Fox via a restated memorandum of agreement, which grants Genting the use of certain Fox intellectual properties (IP), is a positive move, said analysts.
Following the full resolution of the legal dispute between the two parties, PublicInvest Research has revised upwards its visitor growth assumption, which it cut to 3%, after the announcement of the legal proceedings in November 2018.
“As such, we raise our FY20-FY21 earnings by 5-11% after factoring in higher visitor arrival of 5-6%,” it said in a report last Friday.
Despite the positive view on the resolution, the research house believes that the restated agreement contains less attractive terms for Genting, compared with the original agreement since it is only allowed to utilise certain Fox IP and the theme park would have to blend in non-Fox IP.
It also said that the theme park will be renamed, possibly without the Fox brand name.
“Nothing was disclosed on fee payment but the original agreement stated that Fox would only start receiving annual fees and royalties after the park opened,” it said.
“This was subsequently amended in 2014 and 2017, allowing Fox to receive payments immediately.”
PublicInvest Research noted that Genting is updating its development and construction plans to complete the outdoor theme park, which is expected to open next year.
Hong Leong Investment Bank (HLIB) Research also expressed its optimism over the development, as the new theme park will be the first theme park in Asia with Fox’s IP, despite the new terms.
“We believe excitement will return as this will still be the first theme park in Asia with Fox’s IP, and is likely to increase footprint,” it said.
With the resolution of the dispute, HLIB Research does not discount the possibility of the theme park opening sooner than expected.
“We note that the outdoor theme park is near completion and reckon it may be able to launch sometime in 2020,” it added.
It noted that several local newspapers had carried employment advertisements for Genting’s theme park division over the past week.
The research house believes that the dispute resolution and clearer direction of the theme park will act as an upswing factor for the stock in the near term.
“Currently, we have penciled 26.6 million visitors for FY20. Holding all else constant, our sensitivity analysis shows that for every 10% increase in visitors (from our assumption), will increase earnings before interest, tax, depreciation and amortisation (ebitda) by about 6.5% and earnings by about 8%,” it said.
