GENTING Bhd chairman and chief executive officer Tan Sri Lim Kok Thay has been quietly making progress on growing the family business.
This has been achieved by snapping up opportunities in New York in the United States and on Jeju Island in South Korea via both the Genting group and Lim’s family investment vehicle – Kien Huat Realty Sdn Bhd – over the last three months.
For example, Lim was one of the three winners for the New York gaming licence back in December.
While the Genting group had failed in both its bids for the three licences that were up for grabs in New York, there was a third bid by Empire Resorts Inc, in which Kien Huat is the controlling shareholder. Kien Huat is also the major shareholder of Genting Bhd with a 39.75% stake.
Empire Resorts won the bid from the New York Gaming Facility Location Board to build the Montreign Resort Casino in the Catskills and Hudson region of New York.
Empire Resorts will spend some US$630mil (RM2.3bil) on the 86,300-sq-ft casino, which will feature 61 gaming tables, 2,150 slot machines and 391 hotel rooms, among other entertainment features.
The excitement was palpable on the morning of Jan 18 on Jeju Island, South Korea.
The Genting group had purposefully flown down its own Lion Dance troupe for the opening of the Hyatt Regency Jeju Hotel.
Dressed in bright orange and armed with giant drums, the upbeat mood of the dancers in the troupe wasn’t simply due to the adrenaline rush they were experiencing – there was an underlying satisfaction that the group had latched on to something no one had.
The Hyatt Regency Jeju Hotel is 50%-owned by Genting Hong Kong Ltd, a subsidiary of Genting Bhd.
Observers note the huge gambling potential Lim had foreseen on Jeju Island for quite a while. Subsequently, Lim attended a second Genting inroad into Jeju – the ground-breaking ceremony for the construction of Resorts World Jeju (RWJ).
This time, Genting Singapore, a subsidiary of Genting Malaysia Bhd , is in partnership with mainland Chinese company Landing International Ltd to develop RWJ, which will be progressively opened from 2017 onwards and is expected to be completed by 2019.
Observers note that Lim is strategically taking advantage of the slump in the world’s biggest gambling hub Macau, where Chinese President Xi Jinping has imposed strict anti-corruption measures.
Since Xi’s campaign began, various reports have indicated that Macau’s six major casino operators have lost about US$75bil in market value.
Jeju Island is not only an hour’s flight away from Beijing, but is also an autonomous region. This means that Chinese tourists do not require a visa to get onto Jeju Island, unlike Seoul.
Seeing this opportunity, Genting Hong Kong Ltd, a subsidiary of the Genting group, purchased a 50% stake or 130 billion Korean won (US$117mil) in the casino at Hyatt Regency Jeju Hotel. The casino, which will be operated under the name “Genting Jeju”, features 29 tables and was officially opened on Jan 18.
The foreigners-only casino is owned by Grand Express Korea Co Ltd, a 50:50 joint venture between mainland Chinese property developer Landing International and Genting Hong Kong.
Landing International is also joining forces with Genting Singapore to build the US$1.8bil (RM6.66bil) RWJ on Jeju Island.
The resort will be developed by Landing Jeju Development Co Ltd, and will be modelled after Resorts World Sentosa in Singapore.
The project would have more than 2,000 rooms and gaming amenities, the company said. It will also house “Jeju’s largest family theme park, largest adventure water park and one of South Korea’s most exciting themed retail and food complexes”.
In recent years, Lim has become active in the US gambling scene via both Genting and Kien Huat. For example, Genting Malaysia, the 49.3% subsidiary of Genting Bhd via its wholly owned subsidiary Genting New York LLC, operates the first and only racino in New York City at the Aqueduct Racetrack. A racino is a racing track with a casino.
Since beginning operations on Oct 28, 2011, it is currently the most profitable racino in North America.
Via Kien Huat, Empire Resorts owns a harness racing track and racino in Monticello, New York, near the Thompson site where the Montreign casino is planned.
Last year, Genting Malaysia opened resorts in Bahamas and Miami.
Genting’s other big venture in the United States is its US$4bil (RM14.8bil) Las Vegas project.
In its latest conference call with analysts on its fourth-quarter earnings, Genting executive director Chong Kin Leong revealed that the original plan for Las Vegas requires reassessment, given the negative anti-gambling developments in China. Genting is now reviewing the product positioning for Las Vegas.
In the meantime, international profits for the Genting group are growing.
In financial year 2014 (FY14), 45% of Genting Bhd’s operating earnings came from Genting Singapore, 40% from Genting Malaysia Bhd and 7% from Genting Plantations Bhd .
CIMB gaming analyst Marcus Chan said the Genting group realised a hefty gain of RM224mil in investment income due to foreign exchange translation gains for its overseas assets.
For the fourth quarter to Dec 31, 2014, the Genting group’s net profit was down 43.4% to RM273.84mil on the back of a 4.94% increase in revenue to RM4.62bil.
In Malaysia, reduced revenue from Resorts World Genting (RWG) was mainly due to a lower hold percentage in the premium players business despite an overall higher volume of business.
Lower revenue from the casino business in the United Kingdom was mainly due to a lower hold percentage of its international markets, although the overall volume of business was higher.
For the full year, net profit was down 17.34% to RM1.5bil on the back of a 6.46% increase in revenue to RM18.22bil.
In terms of gaming contribution, Chan estimates that by 2018, Genting Malaysia will be an equal contributor to Genting’s operating earnings (41%, based on Chan’s estimates) with the new RM5bil Genting Integrated Tourism Plan expansion in Genting Highlands.
Come 2016, RWG will open its doors to the much-anticipated 20th Century Fox World outdoor theme park, the first such facility to be developed by Genting.
The 10-year masterplan to upgrade its flagship hill-top casino project includes the RM1bil 20th Century Fox World theme park, a new cable car station, a shopping mall and hotels.
At Genting’s current price of RM8.60, it is trading at a trailing price-to-earnings ratio of 21.24 times. A Bloomberg consensus shows that of the 22 analysts covering the stock, seven have “buy” calls, 13 have “hold” callsand two, “sell” calls.