Genting Bhd., the Malaysian gaming operator that’s expanding into Singapore, said revenue from its latest venture will make it the world’s third-largest casino operator within a decade. Its shares extended gains to a record.
„To be the top three, you need to show some real revenue, and the revenue for this project will form a substantial part of the target,“ Genting Chief Executive Officer Lim Kok Thay said in an interview yesterday. „We’ll start to see that in the fourth to fifth year“ after the resort opens in 2010.
Genting, currently the fifth-biggest casino-operator by market value, was chosen last week to develop a USD 3.4 billion resort in Singapore. Its proposal, which includes a Universal Studios theme park, aims to woo gamblers from Southeast Asia, India and China, and as far away as Europe and the U.S.
„Winning this project has been extremely important for Genting,“ said Jorry Noeddekaer, who helps manage $ 1 billion of Asian stocks at New Star Asset Management in London. „When it comes to the high-roller segment, scale can help because it makes sense to offer several casinos as part of their services.“
Genting, which runs two casinos in Malaysia, also owns the U.K.‘s biggest casino-operator and Asia’s biggest cruise line. The Kuala Lumpur-based company posted sales of 5.4 billion ringgit (USD 1.5 billion) last year.
Among Genting’s bigger rivals by market value, Las Vegas Sands Corp. had USD 1.7 billion in sales, MGM Mirage reported USD 6.5 billion in revenue and Harrah’s Entertainment Inc. had sales of USD 7.1 billion last year. Genting’s revenue was double that of Wynn Resorts Ltd., the fourth-largest gaming-operator by value.
Lim’s target is for Genting, which was founded in 1965, to become one of the three biggest casino-operators in terms of revenue, gaming tables, market value and locations.
„This win is a transforming deal,“ Sean Monaghan, an analyst at Merrill Lynch & Co. in Singapore, wrote after Genting won the bid on Dec. 8. „This project gives the company a major new engine for growth, an expanded portfolio of assets and enhanced credibility globally, which should facilitate further success in future bids.“
Genting’s shares rose for a second day after winning the Singapore bid, extending yesterday’s record close. The stock gained 50 sen, or 1.6 percent, to 32.5 ringgit at the 5 p.m. close in Kuala Lumpur. Malaysia’s key stock index fell 1.2 percent, the first decline in three days.
Genting, known for its hill-top casino-resorts on the outskirts of Kuala Lumpur, plans to tap a surge in travelers in Asia drawn to gaming destinations. Macau, the only place in China where casinos are legal, is poised to overtake the Las Vegas strip as the world’s largest gaming hub in revenue this year.
Casinos in Macau collected USD 3.1 billion in gaming revenue in the six months ended June, more than in the whole of 2002, according to the city’s Gaming Inspection and Coordination Board. The Las Vegas strip collected USD 3.3 billion in the same six-month period, according to the Nevada Gaming Control Board.
Genting beat Kerzner International Ltd., which owns the Atlantis resort in the Bahamas, and Eighth Wonder, the developer of the New York New York property in Las Vegas, for the Singapore bid. Harrah’s dropped out of the race four days before the Oct. 10 deadline for the submission of proposals.
The Singapore government has said the license awarded to Genting will be the last for at least 10 years. Las Vegas Sands won the concession for the first casino site in downtown Singapore earlier this year, where it plans to spend more than $ 3 billion in a resort that will include a convention center with more meeting space than the city’s 50 hotels combined.
Located on the resort island of Sentosa, Genting’s project will focus on drawing families.
The company expects annual gaming revenue of between USD 1 billion and USD 2 billion, matching the estimates of Las Vegas Sands. The Malaysian company also projected a 15 percent return on its Singapore development and estimated it would take seven years to recoup its investment.
Genting International, Genting’s overseas unit, said today it’s selling SGD 425 million of five-year zero-coupon bonds that can be converted into stock to fund the building of the resort.
Genting Bhd. said today it will raise another 1.04 billion ringgit (USD 294 million) by selling 33 million new shares at 31.5 ringgit each.
The development will draw 15 million visitors in 2010, with a „substantial“ number going to the Universal Studios theme park, according to Genting’s estimates. Universal Studios, a unit of General Electric Co., will manage the theme park and won’t have an equity stake in the project. Still, Genting is „open“ to the possibility of an investment in the future.
„If Universal changes its mind and would like to talk to us, we’d be happy to talk to them,“ Lim said. „We find them to be a great partner.“
The Singapore theme park will be larger than the location in Los Angeles, and 16 of the 22 rides proposed will be specifically designed for the city-state.
„It doesn’t hurt to have scale,“ said Tan Chong Koay, who oversees more than USD 700 million as chief executive officer at Pheim Asset Management Ltd. in Singapore. „A lot of the super rich will be attracted to Singapore, especially with a theme park.“