Gaming sector
Maintain “overweight” on gaming sector. We believe the gaming sector has much to look forward to during the next six to 12 months. In the first half of 2015 (1H15), we expect the award of four casino licences in upstate New York, in the United States, which Genting Malaysia Bhd is eyeing. Then, there will be the implementation of the goods and services tax in April 2015 where casino and number forecast operator players are hopeful to offset it with a lower gaming tax. In 2H15, we expect news flow on Genting Singapore’s investment in South Korea’s Resorts World Jeju to dominate over the delay in passing the casino bill in Japan. However, along the way, noises on corruption crackdown and the economic slowdown in China will continue to affect the very important person volumes.
Casino bids in upstate New York 2015 may start off with the award of the long-awaited four casino licences in upstate New York, where there are 16 bids vying for licences in three regions namely Catskill and Hudson Valley, Orange County, Capital, and the Eastern Southern Tier. As The New York Gaming Facility has limited the gaming facility to two of any of the three regions, fierce competition can be expected in Catskills and Hudson Valley, which has gathered nine out of the 17 bids including the two proposals from Genting Malaysia.
Genting Malaysia already presented its proposals for regulatory hearing in September 2014, in which it identified two locations for its destination resorts and casinos. These include the US$1.5 billion (RM5 billion) Forest Sterling Resort & Casino proposal in Tuxedo and a smaller proposal in Montgomery, Orange County, both in the US.
As far as the Forest Sterling proposal is concerned, oppositions to the plan relate mostly to environmental issues as it is believed the development will have harmful effects on the forest and natural habitats as well as polluting the water supply in New York and New Jersey. However, Genting Malaysia pledged to build water reclamation facilities to assure the wastewater will be treated to portable standards. Also, the proposed development includes the building of a new exit off the New York State Thruway.
Importantly, the casino resort development will have enormous economic implications in terms of tax revenues and job opportunities. Genting Malaysia also promised to pay US$450 million for the licence fee, significantly more than the required US$70 million.Note that this US$1.5 billion development will feature a 1,000-room 5-star hotel, 19 restaurants, a world-class spa by ESPA, a new ski centre and fairgrounds. We are positive on the development proposal, if given the greenlight, as it will serve to diversify Genting Malaysia’s earnings and enhance its share of gaming revenue in the global arena. The location, which is closest to New York City (approximately 56km), is expected to benefit from the 50 billion local and international tourists in New York City. — TA Securities, Dec 10
This article first appeared in The Edge Financial Daily, on December 11, 2014.