Cash-rich Genting hungry for new gaming markets
A man walks past a Genting signboard at Genting Highlands July 27, 2009. — Reuters picKUALA LUMPUR, June 8 — Genting Berhad sits on more cash than any other gaming operator in the world, yet it is raising additional billions on the debt market, fuelling speculation that its stake purchase in Australia’s Echo Entertainment is just the beginning of an acquisition spree.
Genting, competing with Las Vegas Sands and MGM Resorts to dominate the Asian casino market, may target assets in Japan, South Korea and Mongolia, analysts said.
Of those markets, Japan may be the most attractive, according to Michael Paladino, a New York-based gaming analyst at Fitch Ratings.
“It could have the potential to be a larger scale (development) because of the size of the economy and the fact that it is a destination in itself, more so than other markets,” Paladino said.
With limited growth at home and a lagging share price, Asia’s second-largest gaming group by market capitalisation is looking to expand its global footprint.
The company, best known for its Genting Highlands casino complex and Singapore’s Resorts World at Sentosa, has invested in the Philippines and Vietnam after missing out on a concession in Macau more than a decade ago.
Genting Berhad is the investment holding company of the Genting Group, which comprises listed companies such as Genting Singapore, Genting Plantations and Genting Malaysia.
Genting Singapore said today it had acquired a small stake in Echo, sparking talk of a takeover of the US$3 billion (RM9 billion) Australia casino firm.
Genting Berhad was sitting on RM17.4 billion in cash and equivalents as of the end of March, so it could conceivably pay for a deal of that size without borrowing.
Last month, Genting said it got approval to raise US$636 million through a 20-year bond programme, after Genting Singapore raised a total of S$2.3 billion through perpetual securities in March and April.
Still, the company’s debt financing is more manageable compared to its peers. Genting Berhad’s debt-to-equity ratio was 0.57 versus 1.12 for Las Vegas Sands and 2.27 for MGM Resorts, according to Thomson Reuters data.
“It is in Genting’s interest to speed up the acquisition process,” said Loke Wei Wern, an analyst with CIMB Research. “They are paying out interest on their loans and that’s quite a lot of money.”
Although Genting’s casino properties in Malaysia and Singapore are highly profitable, growth is limited compared with the booming global gaming industry, putting the company under pressure to seek out more promising options.
Genting’s shares have fallen about 13 per cent so far this year, compared with a 0.6 per cent gain in the Thomson Reuters Asia Pacific Casinos & Gaming Index.
In Singapore, the government restricts casinos from marketing to locals, and junket operators are not allowed to provide credit to VIP players, which limits their appeal with high rollers.
“With (Sentosa) getting close to the end of its development phase, it’s the right time for the group to start looking at what could be coming up in future,” said Grace Ho, a fund manager at Lion Global Investors who covers Asian equities. — Reuters
