Genting Bhd., which gained control of the U.K.‘s biggest gaming operator three days ago, said a successful bid for a Singapore license may help propel its ranking to among the world’s three biggest casino companies.
The operator of Malaysian mountain-top gaming-resorts plans to submit a bid exceeding USD 1 billion tomorrow for a license to build Singapore’s second casino in a complex with a Universal Studios theme park, hotels, shops and restaurants, among other attractions on Sentosa island.
The Kuala Lumpur-based company, the world’s fifth-largest casino-operator by market value and the biggest in Asia, is counting on the Singapore bid to give it the geographic reach and revenue to compete against its biggest rivals, including Las Vegas Sands Corp. and Harrah’s Entertainment Inc.
„The biggest exercise before us is the submission of the Singapore Sentosa integrated resort,“ Lim Kok Thay, Genting’s chief executive officer, told reporters Oct. 7. „If I get Sentosa, it’s presto,“ he said, responding to a question on when he expects to reach the company’s target.
Genting, controlled by Malaysia’s third-richest family, aims to be among the world’s three biggest casino-operators by market value, sales, gaming tables and locations. The stock gained 1 ringgit, or 4 percent, to 26.25 ringgit at 9:05 a.m. Kuala Lumpur time. Its unit, Genting International Plc, traded in Singapore, rose 2 cents, or 5.5 percent, to 38.5 Singapore cents.
The company said Oct. 6 that it owns or has received bid commitments for 69.4 percent of Stanley Leisure Plc stock after an offer that it says values the largest U.K. casino operator at 639 million pounds (USD 1.2 billion). The operator of 45 U.K. casinos will be taken private when Genting gets more than 90 percent of its stock, Lim said.
Genting’s shares are trading at 13 times its earnings, which Loke Foong Wai, a Credit Suisse Group analyst, said is „well below“ the global average of 21 times for gaming companies. The ratio is the lowest among the world’s 10 biggest casino operators, Bloomberg data showed. Las Vegas Sands stock is trading at 55 times earnings, while Harrah’s is 21 times.
„Genting’s current share price does not reflect any chance of the company winning the bid“ in Singapore, Loke wrote in a Sept. 28 report. „We believe Genting is a strong contender in the Sentosa race and should it succeed, there’s a 19 percent upside to our 2010“ pretax earnings estimate. Loke rates the stock as „outperform.“
The stock has climbed 18 percent this year, making it the fifth-best performer among the world’s 10 biggest casino operators by market value. Las Vegas Sands was the best-performer after its shares soared 81 percent.
Singapore is offering two sites for casino-resorts to double the number of tourists to 17 million by 2015. The first site, located in the city’s center, went to Las Vegas Sands earlier this year. The world’s biggest casino operator by market value plans to spend more than $ 3 billion on the project.
Genting, which had offered $ 3 billion for the downtown location, will now compete against Kerzner International Ltd., owner of the Atlantis gaming resort in the Bahamas, and Eighth Wonder, a Las Vegas-based developer, for the Sentosa site. Harrah’s, which had planned to bid, withdrew on Oct. 6. Singapore won’t introduce new casino players to the market for at least a decade.
Its purchase of Stanley gives Genting a company that has suffered from the „luck“‚ of its customers. Liverpool, England- based Stanley last month said wins by high-spenders at its London casinos had hurt profitability since the beginning of its May 1 fiscal year.
The Malaysian company plans to use Stanley to bid for more gaming projects as the U.K. offers about 17 new licenses next year, as well as increasing its presence in Europe, Lim said.
„Going further out, using the U.K. as the platform, it’s only logical that Europe would be the broader expansion area we hope to be looking at,“ said Lim.
Genting counts 2 million customers in its loyalty program, which it said is the biggest outside the U.S. The Singapore bid would be strengthened by its ability to cross-sell its casinos using Stanley’s customer base, Lim said. The U.K. was the island- state’s eighth-largest source of tourists in August.
In Asia, Genting has been in „exploratory talks“ with authorities in Japan, which hasn’t decided on its casino laws. The company owns 4 percent of Galaxy Entertainment Group Ltd., one of Macau’s six casino-license holders, and is interested in expanding in the former Portuguese enclave, the only place where gambling is allowed in China.