NEXT For Genting Bhd ... Still In Expansionary Mode !

It is aggressively expanding its gaming footprint in key markets while eyeing lucrative casino licenses in NY and Japan.

Its expansionary mode for 2014 may continue to weigh down its share price.

Genting remains busy in seeking out new casino resort projects and even uses resources to build its USD4 billion Resorts LV and a USD2.2 billion casino resort in Jeju Island.

Year 2014 as an expansionary year for Genting as it needs funds and time to turn its active plans into business contributions. This in the near term, its share price may continue to lag behind those of regional peers.

Another key reason for the underperformance prior to June 2014 could be the group being subjected to overseas contributions. Its share price could also be dragged down by Genting Singapore as it hold close to 52% of its Singapore unit.

In the case of Genting Malaysia, also not expecting to perform well given the refurbishment of its theme park in Genting Highlands is ongoing.

As at March 2014, Genting Mal has rm3.7 billion in cash.

The construction of the Vegas casino is expected to start in 2HFY2014 and it will take two to three years from 2014 to complete.

Genting also faces an uphill battle for four coveted casino resort licenses being issued by NY state. If Genting is unable to get a license in NY, there could be some weakness in sentiment among investors.

Genting has always plans to have some of its assets listed in Malaysia such as the power business. The energy business will also be unlikely to give a revenue contribution now (June 2014). They are continuing with their exploration phase.

The most obvious listing choice is left over is O&G and small investments in Power assets.

Overall the industry observes are positive about Genting given the encouraging volume in Genting Singapore and its potential ventures in Japan and Korea.

Genting Malaysia, will not see any near term catalyst and any boost to Genting Malaysia will come only in 2016 onwards after the opening of its Twentieth Century Fox Outdoor Theme Park in Genting Highlands, an additional hotel as well as improvements

Also does not expect any news from US and UK to significantly boost the group’s share prices unless revenue from its expansion plans kicks in or the company hears from new developments from Japan and Korea.

The gaming sectors in the US, UK and Macau are mature and the group may face competition to bring the business to the next level. In contrast, Japan and Korea are considered new markets with better growth potential.

Genting Bhd/ Genting SP - Japan's Plan

Its near term catalyst include Japan's plan to revive the liberalisation of its gaming industry.

Japan had started initiating a plan to liberalise casinos via a proposed legislation to allow gambling resorts to be developed in big cities and regional areas. Tokyo and Osaka could potentially be among the sites for the casinos.

If the casino bill is passed during the next legislative session, Japan could open its first casino resort as early as 2019.

Genting Singapore is mandated to represent Genting Group in bidding for large-scale gaming liberalisation in East Asia, including Japan.

This is the most anticipated gaming liberalisation in the region as it has always maintained that should United States offer the most exciting gaming liberalisation theme in the West, then the potential gaming liberalisation in Japan will be the most anticipated gaming event in the East, or even in the gaming world.

This is in view of the sheer size of its economy and the popularity of its existing gaming market with a mere presence of Pachinko and Pachislo.

Japan's casino proposals were first mooted by legislators in 2002, but only to be deferred due to political instability and concerns that legal gambling may lead to corruption, money laundering and other crime.

Japanese Prime Minister Shinzo Abe appears to support the casino plan in view of Tokyo's upcoming hosting of the 2020 Summer Olympics, which may induce Japanese lawmakers to liberalise the sector to provide entertainment to visitors.

Genting UK/Genting Bhd/Genting Malaysia

Tan Sri Lim Kok Thay’s Genting group is quietly revamping its operations in London where more casino friendly laws are being weighed alongside potential job creation.

That’s what Tan Sri Lim Kok Thay is betting on as the group steps up efforts to won premium players in London and to beef up the competitiveness of its offerings in other parts of the UK .


In Oct 2012, constructing work began on Genting UK ’s rm615 million Resorts World Birmingham, an integrated complex with a casino, hotels and etc … that is slated for completion in Jan 2015.

In London , Genting in Dec 2012 shuttered the poker only Fox Poker Club which will be reopened as March 2013 as a Genting casino after renovation.

Genting’s attempt to bolster its UK operations also comes at a time lawmakers are reportedly contemplating legislation changes that would allow easier movement of casino licenses between localities in the UK . British gaming industry players are lobbying for the move to facilitate expansion in better locations. Some politicians are reported to be in favor of it as allowing licenses to be ported from one local jurisdiction to another would mean no additional licenses would be issued.

Tan Sri Quek Leng Chan also seems to be eyeing the London gaming market.

While countries like Japan and South Korea may potentially be new growth markets for the Genting group, should it win a license, there is concern about some cannibalization of existing casino markets.

Industry observers are lowering expectations of Genting being successful in its bid for a full casino license in NY.

Genting had also a presence in Philippines but lacks a presence in Macau . However its UK casino is seeing higher patronage.

Genting Bhd

Anticipation that an 18 year long mega casino project being planned in South Korea will provide it the much needed investment opportunities outside Malaysia .

 

It was reported that the South Korean port city of Incheon has partnered with a group of investors to develop a US$290 billion leisure and gaming destination to rival Macau and Las Vegas .

 

The SK government liberalized laws to lift a major hurdle for foreign investment in opening foreigners only casinos.

 

The partnership could be a win win situation for all parties in turning SK into a gaming destination … Casino players could benefit given the opportunity to penetrate into a new market.

 

Market observers would not be surprised if Genting is interested as it had earlier shortlisted SK as one of the group’s potential new market, given the country’s well established infra and high GDP per capita.

 

Genting is looking for ways to expand outside Malaysia and this is one opportunity. With its track record in casino operations in Malaysia and globally, there is merit to believe that Genting may gain a footing in SK.

 

In fact, Genting share has not brightened up for some time till late Oct 2012 due to the perception of election risk. Since mid Sept 2012, it had hovered at below rm9.00 following news reports that PAS might close down Genting casinos if PAS won the coming state election in Pahang.

 

Other catalysts for Genting include the higher than expected visitors’ arrival into Malaysia , Genting Malaysia ’s UK development completed earlier than expected and the license to develop full scale casino will be granted by the NY legislators.

Genting Bhd… dated Aug 2012

Genting Singapore reported net profit and revenue dropped due to a drop in mass-market gaming revenue. There are downside risks to Genting's near-term earnings prospects with its major earnings contributor, Genting Singapore , reporting a disappointing second quarter profit.

Furthermore, investors' interest in Genting's overseas ventures has subsided somewhat with the postponement of bills to liberalise Miami 's gaming laws to 2013. Genting, through Genting Malaysia Bhd, which had acquired 13.9 acres of prime freehold waterfront property in downtown Miami for US$236mil in May 2011, was forced to scale back on plans for a US$3.8bil mixed development project after Florida state legislators had second thoughts on a bill to liberalise gambling earlier 2012.

There were potential regulatory uncertainties associated with the proposed amendment to the Casino Control Act by the Singapore government. The amendment included limiting Singaporeans' visits to both casinos on the island besides heavier financial penalties. Genting Singapore to account for 46% of Genting's earnings before interest and taxes.

Although Genting offers indirect exposure to both Genting Singapore and Genting Malaysia, do not foresee its holding company discount to narrow persistently in the near future, given the lack of urgency for management to restructure its non-gaming portfolio.

Furthermore, the rising volatility in the equity market does not favour asset reflation play while there is also increase risk premium as the general election draws closer.

The Genting is expected to record a one off net gain of about rm1.9 billion from the proposed sale of Genting Sanyen contributing to an increase of about 52 sen to its consolidated earnings per share for the current financial year. However, following the disposals, the earnings contribution from its power division will be reduced significantly because although the group has other power plants such as in china, its most profitable plant is in Malaysia .

 

The disposal would also lower Genting Bhd’s earnings but existing the Malaysian power business removes a future overhang. If does look like the group still wants to keep its international assets. It clinched a 660MW PPA in Indonesia to complement its India and china interests.

The potential divestment is a reaffirmation of Genting’s direction, becoming a purer global gaming entity, or a conglomerate that is more appreciate of sustaining its level of returns rather than getting bogged down in businesses that are increasingly marginalized.

 

The money will likely be put to good use in overseas power projects or into more gaming opportunities. The prospect of a special dividend was unlikely given that the cash proceeds would be placed in bank deposits and money market instruments for future use. Genting's cash pile was “once again swelling up in anticipation of acquisition opportunities”.

 

Genting raised RM2bil in medium term notes towards end-May 2012 and the group remains vigilant for new business opportunities, especially in the gaming sector. Industry watchers believe the gaming giant could be putting money away to expand its power businesses in India , China and Indonesia .

 

In July 2012, Genting announced its maiden foray into Indonesia 's energy sector by signing a 25-year PPA with the state-owned electricity company there to build and operate a 660MW coal-fired power plant in Banten, west Java, estimated to cost RM3.2bil.

 

With the additional cash in hand, the group could explore other potential power assets abroad as it aims to own a total effective capacity of at least 3,000MW.

 

Genting Bhd/Genting Sanyen

1MALAYSIA Development Bhd (1MDB) is buying another power asset for as much as RM3.5 billion, its second in five months after a RM8.5 billion acquisition of Tanjong Plc’s power business.

 

Sources said the government-owned firm is paying between RM3 billion and RM3.5 billion for Genting Sanyen from the Genting Group. The deal is reaching its final stage and will be announced soon. This is part of 1MDB’s business plan which has identified power as one of its core businesses as well as ensure the long-term power security of the country.

Genting Sanyen is the power arm of conglomerate Genting Group and is one of the country’s five independent power producers (IPPs).

Another source said the acquisition is part of the government’s plan to take over some of the country’s first-generation IPPs whose concessions are due to expire by 2015 and 2016.

 

The potential acquisition of Genting Bhd's power assets by 1Malaysia Development Bhd (1MDB) in a deal reported to be worth up to RM3.5bil is seen as a positive development for the Genting group. Such a deal, if materialised, would see Genting getting a fair offer for its power assets and a good opportunity to expand its gaming operations.

 

Market observers opined that such a potential deal between 1MDB and Genting was “likely to go through, as it is part of the Government's plan to take over the country's first-generation IPPs and subsequently aid Tenaga Nasional Bhd (TNB) from continuing to bleed financially.”

 

Although the potential sale was contrary to Genting's expansion plan under the power division, it will eliminate uncertainties about the power purchase agreement (PPA) re-negotiation with the Government.

 

If the deal materialised, Genting could have total net cash of more than RM9bil. With such a huge cash, the group can continue to acquire more power plants regionally and expand its gaming operations, or distribute its excess cash to shareholders in terms of special dividend. Should the group distribute the RM3bil to RM3.5bil proceeds, shareholders could receive cash dividends of 81 to 94 sen per share.

 

However some were surprised about the deal given that Genting Sanyen won the bid in July 2012 to build a US$1bil (RM3.12bil) greenfield 660MW coal-fired power plant in Indonesia .

 

In addition to its Malaysian asset, Genting also has two other power assets in India and four others in China .

 

If the deal materialises, would involve all power assets except the upcoming Indonesia IPP.

 

Genting dispose @ 29july2010

Sold off all my Genting share. Currently no more genting share on hand.