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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Genting bets on Sri Lanka?

Genting bets on Sri Lanka?

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1Genting bets on Sri Lanka? Empty Genting bets on Sri Lanka? Sat Mar 08, 2014 8:54 am

Jeremy

Jeremy
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

THE Genting group, on an expansion trail, may be close to securing a casino venture in Sri Lanka, sources say.

The tourism industry in Sri Lanka, a country which boasts of fine beaches and interesting wildlife, has been booming in recent years after the end of a decade-long civil war and it is no secret that Genting has been eyeing entry into the market, industry observers say.

Genting’s interest in the Sri Lankan gaming scene has long been speculated, dating back to 2010 when the Sri Lankan government passed a bill to regulate the gambling industry to boost tourist arrivals. But the idea was put on the backburner after laws related to casinos faced opposition.

Last year, the government approved the development of three integrated resorts (IR), one of them to Australian casino mogul James Packer who controls Crown Ltd.

ASX-listed Crown is planning a US$350mil resort-casino complex in the heart of the Colombo commercial hub with local casino operator Ravi Wijeratne, who owns two casino approvals in Sri Lanka according to a Reuters report in December. The Reuters report, quoting government officials, said another Sri Lankan entreprenuer Dhammika Perera, who has been running casinos on a small scale, owns three casino approvals.

Perera, who got approval to build a US$300mil casino resort facility, was reportedly looking to lure a US or Asian gaming brand for one of his casino approvals. The third IR project that will be built is a US$650mil casino project by local conglomerate John Keells Holdings.

Sources say Genting’s possible venture into Sri Lanka could also be via a tie-up with a local partner as the government policy was not to issue any new casino licences, but to allow existing approvals to operate under regulations passed in 2010.

“Gaming licences are not something that come by easily, so Genting is always on the lookout for any openings,” a source tells StarBizWeek.

“It is also about positioning. Sri Lanka is not exactly a gaming haven, but it is a gateway to the untapped Indian market where gambling is highly regulated,” says a source.

Genting, when contacted, declined to comment.

Of interest is that Genting has a presence in Sri Lanka via a 25% stake in the Union Bank of Colombo, a smallish commercial bank accounting for less than 1% of the country’s banking sector assets.

The source says Genting hopes to draw from the Philippines’ experience where it had a first mover advantage when Resorts World Manila (RMW) opened in 2009.

Analysts say RWM is well positioned for a multi-year growth story as it embarks on its next US$700mil capex cycle to double its room and gaming capacity by 2018.

“The Philippines is a roaring success story with Genting having recouped investments made within a year. It is exploring Sri Lanka in the same vein,” says the source.

In 2012, Sri Lanka received one million international visitors and is targeting 2.5 million arrivals by 2016 according to news reports. China is one of Sri Lanka’s fastest-growing visitor source markets, with arrivals from the country surging 75% in the first 10 months of 2013 but arrivals from India is fast rising – up 9% in the same period, media reports indicate. Tourism revenue surged above the US$1bil mark in 2012 and could surpass US$2bil a year ahead of the target set for 2016.

Currently, there are around nine small casinos already in operation in Sri Lanka although only four are licensed and registered with the Department of Inland Revenue, reports indicate.

Betting big overseas

In recent years, cash-rich Genting has been investing substantial amounts overseas to diversify beyond its strongest, but saturating Malaysian and Singaporean operations. Analysts estimate that at the rate that Genting is expanding abroad, its Malaysian operations will account for less than a third of its revenue, from about 40% currently. As at Dec 31, it had RM11bil cash.

“After being side-lined in Macau, Genting’s strategy is to look well ahead of the curve and work towards a vision of having a footprint in every major international gateway,” CIMB Research said in a recent regional gaming sector report. For the record, Genting failed in its bid to get a casino licence in Macau in 2001. The research firm estimated Genting would be spending US$9.5bil over the next five years excluding potential opportunities in Miami and Japan.

Earlier this month, it made its maiden foray into South Korea via a US$2.2bil (RM7.33bil) joint venture on the Jeju Island.

Through Genting Singapore Ltd, it is vying for a licence in Japan, which may soon legalise casinos. But it will be up against some big names like Las Vegas Sands Corp and US-based MGM Resorts International who are also reportedly eyeing Japan. Industry analysts predict Japan could rake in US$15bil in annual gaming revenue, making it Asia’s largest market for gambling after Macau.

Genting’s plans in Miami in the US two years ago had hit a legislative bump but there may be a breakthrough with the state’s legislators introducing a draft bill and voting on a new gaming law in the second quarter of this year. It had invested close to US$500mil in two properties in Miami and is awaiting legislative approval for a casino permit.

It is no secret that to be dubbed a major gaming player, one needs to have a presence in Las Vegas. Genting is pouring US$4bil into an unfinished project it took over in Las Vegas with construction expected to start in the second half of this year. CIMB noted that Genting’s timing into Vegas is favourable given the resurgence of Asian VIP business into the casino hotspot. It expects the group to cross-market their Asian VIP database into Vegas not unlike other international gaming players there.

“Although Macau continues to take centre stage with US$45bil in gross gaming revenue in 2013, the US remains the biggest gaming market in the world at US$70bil a year,” CIMB Research said in its regional note. The research house does not rule out the group pooling its assets in New York, Las Vegas and Miami for a combined listing in the US to crystallise value.

http://www.thestar.com.my/Business/Business-News/2014/03/08/Genting-bets-on-Sri-Lanka/

2Genting bets on Sri Lanka? Empty Re: Genting bets on Sri Lanka? Sat Mar 08, 2014 4:28 pm

FLOWER2

FLOWER2
Manager - Equity Analytics
Manager - Equity Analytics

It is interesting. That means more visitors!

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