Thursday 28 Mar 2024
By
main news image

Genting Bhd
(Dec 4, RM 9.16)
Downgraded to “add” with target price (TP) of RM9.90.
The unexpected snap elections in Japan will likely dampen Genting’s  aspirations to enter a potentially lucrative market. Resorts World Jeju in South Korea is on track, but is unlikely to be significant due to regulations. Declining Chinese tourist arrivals continue to weigh on Genting Singapore (GENS), but we see potential re-rating catalysts in improving non-gaming segments and a recovery in Genting Malaysia’s (GENM) visitor arrivals.

Japanese Prime Minister Shinzo Abe’s recent decision to call a snap election on Dec 14 means that the casino bill will be delayed to 2015 or later. This is a short-term setback for Genting (note that the venture into Japan as well as South Korea will be via its subsidiary GENS), given the importance and potential size of Japan as a major gaming market but we believe this is not the end of the casino bill.

Initial expectations had been high that the casino bill could have been passed in the autumn Diet session, but this is clearly no longer the case. Media reports suggest that Abe will likely win the snap election, but will need to win substantially to have enough support to pass the casino bill.

Still, we believe that the prospect of high gaming tax revenue to aid fiscal consolidation efforts will keep Japan’s casino bill alive, as long as social issues such as creating gambling addicts or attracting organised crime can be properly addressed. Singapore’s integrated resorts have been a success in this respect, which we understand Abe had studied closely.

To have a grasp of the potential market size of Japan’s gaming market, one only needs to look at the revenue generated in the Pachinko industry.

Millions of people in Japan play Pachinko, a derivative pinball game (balls won are exchanged for tokens or prizes) in an industry that is said to be worth US$200 billion (RM690 billion) in revenue each year. In comparison, Macau (the world’s biggest gambling hub) generated US$45.2 billion in revenue last year, while US$6.5 billion and US$6.1 billion were generated in Las Vegas and Singapore respectively. — AffinHwang Capital, Dec 4

Genting.png

This article first appeared in The Edge Financial Daily, on December 5, 2014.

      Print
      Text Size
      Share