Genting Malaysia; Hold; RM3.88
Price Target: RM4.05; GENM MK

GENM MK According to Bloomberg, New York Governor and legislators have agreed to allow 4 casinos in upstate New York and 3 in New York City region 7 years later. For Phase 1, 2 casinos will be allowed in Catskills and 1 each in Capital Region and Southern Tier. The constitutional amendment is slated to go to voters in Nov.

The state will share 39% of slot machine and 10% of table revenues (vs 25% for slot machines at Native American casinos; 65% of VLT at racinos). Slot machine constitutes 70% of casino’s gaming revenue. No specific upfront fee for a casino license and thresholds for capex or job creation will be set.

Off-track betting corporations in Suffolk and Nassau counties may also be allowed to install up to 1,000 video lottery machines (VLT), the first sites other than racetracks to be agents of Division of Lottery. Should the constitutional amendment for casinos be defeated, VLT facilities could also be authorized upstate and on Long Island at sites determined by the state Gaming Commission. These would increase competition for existing racinos (Resorts World at New York contributed 7% to 2012 EBITDA).

While GENM is interested to bid for a casino licence in New York, Phase 2 expansion ie New York City will definitely be more appealing and can extract more synergy with RWNY. Bidding competition however will be steeper, although GENM can rely on its strong track record and balance sheet. Hence, any catalyst from this front for GENM will likely come later rather than sooner.

Maintain Hold and TP of RM4.05, based on sum-of-parts.

Source: HwangDBS Research - 20 Jun 2013