Friday, 06 January 2012 12:19
KUALA LUMPUR: With yesterday’s announcement of the proposed expansion of the Resorts World New York (RWNY), Malaysia’s Genting Group appears to have won the support of New York governor Andrew Cuomo to build the largest convention centre in the US, a project that may come with a full-fledged casino licence.
Expected to cost US$4 billion (RM12.56 billion), the proposed integrated mixed-use development would expand RWNY and includes 3.8 million sq ft of convention and exhibition centre with up to 3,000 hotel rooms.
As it is, RWNY, which opened Oct 28 last year, is something of a “virtual casino”, offering only video slot machines and electronic table games via an arrangement with New York Racing Association which operates the Aqueduct Racetrack in Queens. Hence, RWNY is also known as a “racino”.
In the State of the State address where Cuomo delivered a blueprint for rebuilding New York on Wednesday, he announced the intention to make the state the No 1 convention
site in the nation with the proposed expansion at Aqueduct.
Cuomo, who is reportedly in favour of legalising casino gambling to generate new revenue for New York state as well as create more jobs, also said New Yorkers could also approve a constitutional amendment to have Atlantic City-styled casinos outside Indian reserve land.
“Let’s amend the constitution so that we can do gaming right,” he said in the speech, pointing out that over US$1 billion of economic activity could be generated from gaming within the state.
While Genting was named as the partner for the convention centre in the speech, Cuomo did not specify who would be granted a full-fledged casino licence if such amendments
were made.
In a statement to Bursa Malaysia yesterday yesterday, Genting Malaysia said wholly-owned unit Genting New York LLC (Genting NY) had on Tuesday entered into a non-binding
agreement with the New York State Urban Development Corp for the proposed development, and would work closely with the latter’s business entity, Empire State Development
Corp, to have a binding agreement by Nov 30 this year.
The proposed project will replace The Jacob Javits Convention Centre on Manhattan’s West Side and reportedly will be larger than Chicago’s McCormick Place, currently the largest convention centre in the US. The 18-acre Javits Centre site will become a mixed used facility to revitalise New York City’s West Side.
Genting Malaysia shares rose to a one-month high of RM3.93 intra-day after the news before closing at RM3.89 yesterday, up one sen or 0.26%. Its parent, Genting Bhd, rose to RM11.18 intraday, but ended unchanged at RM11.14 while Genting Singapore shed three cents or 1.9% to S$1.53 (RM3.73) yesterday.
Genting owns about 54% of Genting Singapore Ltd, 48.3% of Genting Malaysia and 18% of Genting Hong Kong Ltd, which houses Resorts World Manila.
It remains to be seen if Genting will get similar support in Florida, where the group has announced plans for a US$3.8 billion bayfront Resorts World Miami, complete with hotels, convention space, retail and recreational space, but is missing a casino licence.
Florida lawmakers are slated to discuss a gaming bill that could pave the way for the award of up to three casino-resort licences on Monday afternoon, according to the Senate session calendar.
Genting officials have won some local support with its promise of bigger revenue streams and higher job creation for Miami, but faces opposition from bigwigs like Florida’s
Orlando-based Walt Disney Co, as well as other community groups who still see casinos as a vice-filled industry linked to thug-like debt-collectors, prostitution and money laundering.
Clearly, the US — where there are some 23 million able but jobless workers — is quickly turning out to be an increasingly sizeable market for the Genting group as well as controlling owners, the Lim family, who through their private vehicle Kien Huat Realty Sdn Bhd, is among pioneer investors in Indian tribal gaming.
Coupled with the over US$580 million Genting has already spent on RWNY so far, the US$4 billion planned expansion, will match the US$4.7 billion that Genting has invested in Resorts World Singapore, the group’s biggest investment thus far.
In Britain, where Genting Malaysia via Genting UK is already the largest casino operator, works are underway for a £120 million (RM586.31 million) Resorts World @ NEC in Birmingham that could be ready by late-2013 or early-2014.
At the time of writing, Genting had not provided a timeline for the US$4 billion potential capital expenditure (capex) in New York. For Miami, the US$3.8 billion planned capex is over a period of 10 years, and will be spent faster if it gets a casino licence.
Prior to the latest US$4 billion planned capex for New York, analysts had estimated that the existing RWNY “racino” could potentially shore up Genting Malaysia’s annual earnings by 10% with the UK operations possibly giving another 5% boost.
Melvyn Boey, who heads Southeast Asia research for Bank of America-Merrill Lynch (BoA-ML) in Singapore, said he wouldn’t be overly concerned over Genting’s expansion moves for as long as its balance sheet can support debt levels.
“I’d only worry if net gearing goes above 50% and stays at that level,” Boey told The Edge Financial Daily in a recent interview.
Boey calculates that Genting Highlands in Malaysia generates “easily RM1 billion free cash flow (FCF) a year, with very little capital expenditure requirement”.
He also sees Genting Singapore steadily generating about S$1.5 billion FCF a year from FY13. “In FY12, the number is already S$1.3 billion and that will grow as capex tapers off,” said Boey, who has tracked Genting since the 1990s.
Even so, details on its planned capex would likely allay any concerns investors may have. Even as capex tapers off across the causeway, talks are that Genting Singapore is looking to invest some of its newly minted cash in Japan, where gaming laws may be liberalised to aid the economy.
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