Genting Singapore Plc expects to break ground on its Jeju project by the second quarter of 2015, according to a note from finance house Nomura.
“Management is actively discussing the Resorts World Jeju project with the governor of Jeju province to address his concerns on the socio-environmental impact, and size of the project,” said the note from analysts Tushar Mohata and Alpa Aggarwal.
Genting Singapore, a subsidiary of Malaysian conglomerate Genting Bhd, is partnering with mainland China real estate developer Landing International Development Ltd to build a US$2.2 billion casino resort on South Korea’s Jeju Island. The property will be modelled after Resorts World Sentosa in Singapore.
The governor of Jeju however is showing resistance to the project and to the expansion of casinos on the island. In October, governor Won Hee-ryong announced he would push for a revision of gaming taxes and to establish a Singapore-style casino watchdog.
“It [Genting Singapore] is still hopeful of being able to break ground on the project by the second quarter of 2015, and hopes to capture the increased volume of Chinese tourists to Jeju Island,” said the Nomura analysts.
Much of the project cost is expected to be funded by the sale of residential properties, “so overall cashflow requirement for the project should be lower,” they added.
The Japanese finance firm hosted the senior management of Genting Singapore, including president Tan Hee Teck, for two days of investor meetings in Tokyo.
Nomura maintained its buy rating on Genting Singapore, citing the Jeju island project and the expected earnings growth from its Jurong Lake Hotel, which should increase visitation to Resorts World Sentosa in Singapore.
“The [about] 500 room Jurong Lake Hotel is due for soft launch in the second quarter of 2015, and should increase the group’s room inventory to [about] 2,000,” said the note, adding that Genting Singapore’s management hopes to drive increased visitation, especially from the Malaysian market driving to Singapore.
Genting Singapore last month reported a 43-percent drop year-on-year in net profit for the third quarter of 2014, mainly on tough trading conditions for VIP play and a sluggish mass market.
“Management [of Genting Singapore] feels that it is halfway through a two-year period of weak VIP trends, due to a slowdown in Chinese VIP players after the increased regulatory scrutiny in China, and junket liquidity issues,” said Mr Mohata and Ms Aggarwal.
After announcing the third quarter results, Genting Singapore has been buying back shares, and has so far accumulated 110 million shares – 0.9 percent of the paid up share capital – for SGD122 million (US$92.2 million).
According to Nomura’s note, the casino operator is still hopeful of the law enabling casino gaming in Japan to pass in mid-2015, once the new government is in session.
Japanese Prime Minister Shinzo Abe last month dissolved the lower house of parliament and called a general election for December 14.
Genting Singapore has set up several subsidiaries in Japan in the likelihood that the country will legalise casino gaming.
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China