Malaysia’s Genting set for US casinos gamble


By Jeremy Grant

For at least two years the mighty Las Vegas gambling strip has waited for signs that its dominance of the US casino business might be coming under threat from the other side of the world – Asia.

Operators such as Sheldon Adelson’s Las Vegas Sands have meanwhile struck out east. It has expanded in Asia’s biggest market of Macau and built one of the two biggest casinos in Singapore.

But developments this week in three US states provided the clearest sign yet that one of Asia’s biggest casino operators, Malaysia’s Genting group, may finally be getting into position to turn the tables on its rivals.

Genting was founded in 1965 by Malaysia’s Lim family with a single hotel and casino in Genting Highlands, a lush hill resort on Peninsular Malaysia.

Genting also has gambling interests in Britain, and operates one of two casinos in Singapore, Asia’s second-largest market by revenue after Macau. The Singapore casino – which competes with one operated by Las Vegas Sands – contributes 40 per cent of Genting group earnings before interest and tax, according to Fitch.

Singapore “catapulted them into the limelight as it showed them competing against Las Vegas Sands – a powerful global operator. They have become a lot more relevant globally,” says Gary Pinge, regional head of Asian gaming at Macquarie.

Almost a year ago, Genting, whose sole US casino business hitherto had been a casino opened in New York in 2011, strode into the Las Vegas Strip by buying an 87-acre site there from Boyd Gaming.

The aim is to develop the site into a 3,500-room property with 175,000ft of gaming space right in the heart of the US gaming business.

This week Genting fired its latest US salvo, after its 47-per-cent-owned unit, Genting Malaysia, said it had teamed up with three horseracing associations in Miami “with respect to a potential casino”.

The same day, Governor Andrew Cuomo of New York state laid out a timetable for attracting the state’s first casinos, with tenders going out in March and bids chosen by the autumn. Genting has been taking a keen interest, eager to expand there too.

Finally, in Massachusetts, Genting received encouraging news the previous week for its involvement in what would be that state’s first casino. The Bureau of Indian Affairs approved a plan for a $500m gaming facility operated by the Mashpee Wampanoag tribe, which is pushing the project in partnership with Genting.

Yet the Malaysian group still faces hurdles. Florida is a complex prospect because only one operator is allowed to run a casino under a longstanding exclusivity arrangement with the state government.

Lawmakers are due to consider this year whether to end that arrangement, providing an opening for Genting’s first casino in Miami – a far from certain prospect.

“Given that . . . legislators have twice rejected ‘destination resorts’ proposals that would allow the creation of at least two sizeable casino resorts, the regulatory approval remains the key hurdle,” said Kenanga Research in Kuala Lumpur.

There are also painful memories of Genting’s first foray into Miami in 2011, when it announced the development of a $3.8bn resort on 30 acres of land downtown.

While the Resorts World Omni hotel that was to form the core of that resort still exists, the wider project never materialised, partly due to opposition from rival existing hotel businesses, analysts say.

The new Miami project would allow Genting to operate a 2,000-slot-machine parlour and off-track betting site downtown. Macquarie’s Mr Pinge said this would still allow the company to get a foothold in the market from which it could expand.

While gaming revenues in Asia are expected to grow by almost a fifth each year to 2015, according to PwC, against 5 per cent growth in the US, he argued that a US push made sense as long as rates of return were above Genting’s cost of capital.

“This year stands to be a very exciting year for them because a number of things might come good. In two or three years’ time people are going to realise these guys are formidable competitors,” Mr Pinge said.

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