This article first appeared in The Edge Malaysia Weekly on August 22, 2022 - August 28, 2022

IN Thailand, legalising gambling has long been opposed by the majority of the population who consider gambling against the values of Buddhism, which plays a significant role in its culture and society.

Currently, apart from horse betting and the government-sponsored Thai lottery, all other types of gambling are prohibited.

However, the winds of change may be coming with a proposal to legalise gambling discussed in parliament in June. This comes shortly after the government decriminalised cannabis in the same month.

There has been much news over the issue of legalising gambling recently, with the Thai government setting up an “extraordinary commission” to study the feasibility of allowing entertainment complexes — which are expected to include casinos — in the country.

Slightly over a month ago, the house of representatives committee studying the feasibility of opening such entertainment complexes proposed having legal casinos in five regions: Chiang Rai or Chiang Mai in the north, Pattaya City in the east, Phuket, Phang-nga or Krabi in the south, Ubon Ratchathani, Udon Thani or Khon Kaen in the northeast, and in Greater Bangkok.

Nevertheless, observers are divided on whether the government will actually legalise gambling this time around.

Maybank Investment Bank Research analyst Yin Shao Yang opines that legalising casinos is not an easy thing to do for any country, even if religion is not an issue.

“We hear that there are forces in the current government benefiting from the underground casino scene and [who] may not be keen on legalising it.

“Plus, a lot of political capital is needed to push through such a law. The government needs to be at the height of its political power and as we know, the current prime minister, Prayuth Chan-ocha, has just survived his fourth no-confidence vote in parliament,” he says.

Thailand is due to hold its general election next year.

However, a Bangkok-based economist who covers the Thai economy believes that there is high possibility that the proposals could pass this time.

For one, legalising the casino business would help add to tax revenue. According to news reports from Bangkok, the proposal comes amid efforts by Thailand to revive its tourism industry — a vital component of the economy — following the Covid-19 pandemic.

The establishment of legal casinos, it is said, would be able to help generate billions of baht from travellers, investors and locals. It would also help to cut down illegal gambling activities. Does this latest development serve as a threat to the Genting group, which is dominant in the casino landscape in Southeast Asia?

If the law is passed and gambling becomes legal in Thailand, analysts take the view that the impact would be felt more greatly by Genting Singapore Ltd (GenS) than Genting Malaysia Bhd (GenM).

GenS is a 52.7% subsidiary of Genting Bhd (GenT) while GenM is 49.5% owned by GenT. In turn, business tycoon Tan Sri Lim Kok Thay owns a total of 43% of GenT through Kien Huat Realty Sdn Bhd.

“I see it as negative for the Genting group in general, but more so for GenS than GenM because the casino in Singapore depends on international tourists, where about 40% of its visitors are from North Asia and another 40% from Asean.

“In Malaysia, about 80% of the casino patrons are locals. They may lose some market share, but they wouldn’t be as [badly] impacted as Singapore,” says an analyst with a local research house.

MaybankIB Research’s Yin shares a similar view that GenS could be under more threat if Thailand pushes through the proposal to legalise casinos.

“Chinese tourists account for about one quarter of GenS’s revenue. Before Covid-19, Thailand had about 11 million visitors from China and Singapore only had about one third of that number. So, if there is any impact from this, it would be likely felt by GenS,” he says.

TA Securities analyst Steve Tan explains while there would be some sort of competition for the Genting group, it would also depend on the type, scale and locations of the casino development, in addition to the number of licences to be issued, in order to assess the impact on the Genting group.

One key question then is whether the Genting group would be interested in participating in Thailand’s casino landscape should gambling be liberalised.

Analysts think that it would be positive for the group if it does.

Tan thinks that there is a high likelihood the group may venture into new casino operations in Thailand as it would strengthen the Genting network in Southeast Asia, thus making it easier to cross market to its VIP customers.

“More importantly, this could help diversify earnings and country risks if Genting fails to renew any of its casino licences in the future,” he points out.

But Yin takes a different view. According to him, GenM has said that it is not interested in setting up a casino in Thailand. He also believes that it is not easy to participate in a new casino investment, especially if the investment were to come from GenS.

“Previously, the Gambling Regulatory Authority in Singapore had highlighted to GenS that if they expand their casino business, it has to be in a jurisdiction as strict as theirs. For now, we do not know yet how Thailand’s regulatory environment will look like.

“When GenS ventured into a casino initiative in Japan, there were no objections from the GRA because the proposed regulations were stricter than Singapore’s. However, the casino did not materialise because of local politics,” he says.

It is also worth noting that an investment in the casino business, especially when it comes to an integrated resort, can be substantial.

Genting Singapore’s Resort World Sentosa cost around S$6 billion. It opened its doors to visitors in 2010. It most recent venture in Las Vegas — Resort World Las Vegas, which opened in June 2021 — cost US$4.3 billion.

There is no doubt then that a venture into another casino would certainly raise the group’s leverage, notes an analyst.

Currently, GenM’s net gearing is at around 69% while GenS is cash rich.

For the first quarter ended March 31, 2022, GenM reported a net loss of RM126.53 million, an improvement from RM483.59 million in the previous year. This came as revenue saw a marked improvement, more than doubling to RM1.7 billion from RM623.35 million in the previous year.

Besides being owner and operator of Resorts World Genting, GenM also owns and operates Resorts World New York City and Resorts World Catskills (where it holds a 49% stake) in the US; Resorts World Birmingham and over 30 casinos in the UK; Resorts World Bimini in Bahamas; and Crockfords Cairo in Egypt.

As for GenS, it reported a net profit of S$84.4 million for the six months ended June 2022, down 4% year on year. Revenue amounted to S$663.1 million, 20% higher than a year ago, with the increase coming from its non-gaming and other sources.

Last Thursday, GenM settled at RM3.02 per share, valuing the company at RM17.05 billion, while GenS settled at 80.5 Singapore cents, valuing it at S$9.78 billion.

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