Genting Malaysia shares tumbled on Tuesday after news that Twenty-First Century Fox was backing out of a long-planned theme park tie-up, with at least one analyst slashing forecasts.
The stock was down 15.28 percent at 3.05 Malaysian ringgit at 3:07 P.M. SGT.
Genting Malaysia has reportedly sued Walt Disney and Twenty-First Century Fox in the U.S. for more than S$1 billion, alleging the two were walking away from a contract to build a Fox-branded theme park in Malaysia. Genting has said that so far, it has invested more than US$750 million in the project.
Nomura said that the dispute was set to further erode confidence.
“Coming so soon after the 10pp gaming tax hike in Malaysia, it further jeopardises the earnings trajectory of GENM,” Nomura said in a note on Tuesday. Earlier this month, Malaysia announced duties on casino gross income would rise to 35 percent from 25 percent previously.
“Going through the 29-page complaint document reveals that it appears the theme park’s construction has been mired in dispute for years now – possibly one of the reasons for multiple delays over the years,” the investment bank added. “While a theme park without Fox IP is possible in a worst-case scenario, it is not necessarily a positive given the US$750 million sunk into the project so far.”
Amid expected delays, Nomura cut its visitation forecasts by 6 percent for 2019 and 2020 and cut its theme park revenue forecasts by 65 percent for each year, resulting in earnings cuts of 20 percent for both 2019 and 2020.
It cut its target price to 3.00 ringgit from 4.20 ringgit and kept its Reduce call on the stock.