Singapore’s government may form a venture with CapitaLand Ltd to take over one of the island’s two casino resorts if Las Vegas Sands Corp fails to stave off loan defaults, CIMB-GK Research Pte has said.
Las Vegas Sands, the gaming company that said last week it may default on debt and face bankruptcy, reiterated last Saturday that it’s committed to the USD 4 billion Singapore resort.
The company has drawn down at least SGD 2 billion (USD 1.3 billion) from a SGD 5-billion credit facility by several banks for the project.
„If Las Vegas Sands cannot cough up its share of equity, the Singapore government is likely to step in,“ Donald Chua, a Singapore-based analyst at CIMB-GK, wrote in a report yesterday. „A viable option could be a 49:51 joint venture between the government and CapitaLand, with CapitaLand taking a controlling stake in the project.“
Las Vegas Sands was one of two gaming companies that won the right to build resorts in Singapore after the city-state lifted a four-decade ban on casinos in 2005 to diversify the economy and create jobs.
The company said last week it faces „substantial doubt“ about its ability to survive and may be short of cash for USD 16 billion of projects in Asia.
Las Vegas Sands yesterday declined to comment on its earnings announcement. CapitaLand said it hasn’t held any discussions with the Las Vegas-based company, adding that it’s seeking investments in the „continuing global recessionary environment.“
Right chance
„Potential opportunities will be carefully explored and evaluated, ensuring that an acquisition is made only at the right time, right price and when target returns are met given the current difficult economic operating environment,“ CapitaLand said.
The Singapore Tourism Board told Bloomberg News yesterday that it remains „in dialogue“ with Marina Bay Sands and will „work closely“ with the company to complete the project.
Singapore’s Minister Mentor Lee Kuan Yew said Las Vegas Sands’s development will go on even as the project comes „under pressure,“ the Business Times reported yesterday.
CapitaLand, Southeast Asia’s largest developer, formed a partnership with MGM Mirage in 2005 to bid for the project that Las Vegas Sands won. It also teamed up with Bahamas-based Kerzner International Ltd to submit a failed bid for a second gaming resort on Sentosa island.
The developer also invested in an entertainment project in Macau last year, giving it a foothold in the world’s biggest casino market by gaming revenue.
Cash kitty
Liew Mun Leong, CapitaLand’s chief executive officer, said on October 31 that the developer’s cash position stood at SGD 4.2 billion, enabling it to seek opportunities for acquisitions.
The developer also said that third-quarter profit fell 26 percent as slowing economic growth hurt demand for homes in Singapore, China and Australia.
Participation in the gaming resort, as well as possible provisions for the value of its land holdings amid a slump in prices, will raise CapitaLand’s net gearing, or debt-to-equity ratio, to more than the company’s target of 0.8 times, CIMB-GK’s Chua wrote in the report.
„While it is currently well-capitalized, we believe the sheer size of the Marina integrated resort project could pose substantial funding strains,“ the analyst said.
CapitaLand rose 7 cents, or 2.2 percent, to SGD 3.24 at the close in Singapore yesterday. The stock has dropped 48 percent this year, compared with a 45-percent retreat in the Straits Times Index.
A stake in the Marina Bay gaming resort could boost the company’s net asset values and earnings outlook, Chua said.
The regulated gambling market in the Asia-Pacific region is expected to expand 15.7 percent a year to USD 30.3 billion in 2011, PricewaterhouseCoopers LLP has estimated.
„If the funding hurdle can be crossed, we believe a possible participation in an integrated resort could spell exciting long-term values for the group,“ Chua said.