Genting beats the odds

The odds have turned to Genting Malaysia Bhd's favour to build a US$3.8bil (RM11.4bil) casino and hotel complex in Florida after a state Senate committee voted to allow the proposal to be debated by the state's lawmakers, analysts said. The bill would deliberate on the issue of liberalising non-native American casinos. While the outcome would only be known in a few months, analysts say the move indicated that people supported the idea of legalised gambling to generate revenue for the economy.

The decision was positive for Genting as Florida may have as many as three Las Vegas-style casinos, with dealers and table games in addition to slot machines. Currently in Florida, state laws only allowed casino gambling to resorts operated by native American tribes and slot machines at horse and dog race tracks. “Genting would be well-positioned to secure the casino licence as it was the first to detail out its plans last year before any development has taken place,” said Alliance gaming analyst Cheah King Yoong. “It's still early days and we still don't know the outcome. However, it's definitely good news for Genting. It has quite an ambitious plan in Miami,” said a gaming analyst from Kenanga Research.

Competition is hot too, as analysts say MGM Resorts International, Las Vegas Sands and Wynn Resorts Ltd are also interested in setting up casinos there. Genting has submitted a master plan which showcased hotels, convention and entertainment centres, restaurants, retail and commercial facilities and residential towers on a waterfront site. It is widely known that the measure is currently opposed by Walt Disney Co, the world's biggest theme-park company, whose flagship Walt Disney World is near Orlando, just over 300km away.

Another gaming analyst added that Genting may have won the battle, but it could be losing the war. “The bill has not been finalised. What if they allowed a lot more casinos to set up shop? So although Genting gets the licence, it might still start off at a disadvantage,” said the gaming analyst. “Furthermore, with Phase 2 of Genting New York venture coming up and estimated at a cost of more than US$4bil (RM12bil), should Genting be awarded the casino in Miami, how is it going to fund it?” asked the analyst.

Last week, it was announced that Genting had entered into a non-binding letter of intent with the New York State Urban Development Corp to consider developing an integrated complex next to its existing facility, Resorts World New York (RWNY) in Queens. The new extension includes a convention and exhibition centre, up to 3,000 hotel rooms and an expansion of RWNY's casino. A binding MoU is expected to be inked by Nov 30. “The timing of the developments will be important. Funding for both the developments in New York and Miami concurrently would mean spending close to US$8bil (RM24bil). I am sure Genting will work its way around that. “However, investors are used with Genting being in net cash position. If debt levels were to rise to above 50%, then that would be something to ponder on,” said the gaming analyst.

Meanwhile, Cheah said the Greater Miami Chamber of Commerce's move to endorse casino resorts in South Florida was a huge plus point in helping to broaden the state's gambling laws.
“The endorsement by the largest business group in South Florida shows that the major business leaders understand the importance of having more income generation streams to boost the sluggish economy in the US. As such, odds are turning favourable to Genting 's Miami venture,” said Cheah. Cheah believes that the market has not priced in the potential of Genting benefiting from the liberalisation of the gaming sector in Miami and the emergence of Genting as a global gaming giant. The gaming analyst said that it was still early to talk about earnings potential should Genting be awarded the casino licence as this would be the first time a full-fledged casino was being constructed.

However, HwangDBS analyst Yee Mei Hui said that Resorts World New York was expected to contribute 16% to Genting Malaysia's 2012 earnings. She is estimating Genting to make RM1.75bil in net profit in 2012. For the nine months to Sept 30, 2011, its net profit was up 17.95% to RM1.08bil while revenue was up 63.26% to RM6.16bil. Genting gets some 90% of its revenues from its mainstay travel and leisure business in the Genting Highland Resorts.
-thestar online.
www.rwgenting.com