News

StarBiz today reported that Genting Singapore (GenS) will partner unnamed “Japanese institutions” to bid for an integrated resort in Japan.

Japan has tabled in Parliament the Casino Introduction Bill and it is scheduled to be read within the next few weeks.

GenS is among the gaming players that are eyeing a slice of Japan’s casino sector, following the country’s plan to revive the liberalisation of its gaming industry.

Comment

Although Genting group is known to be the sole operator in each of its gaming/destination resort properties, we are not surprised that the GenS have taken the move to partner with Japanese firm(s) should they win an Integrated Resort (IR)/gaming license in the country.

We believe this move is sensible as Japanese would prefer Japanese company(s) to have some connection to the operator of the casino/destination resort in the country. This would mean any consortiums/JV with Japanese company(s) would stand a higher chance in winning the license bid should the bill be passed.

However as time passes, the opportunity for the bill to be approved by both lower and upper house get slimmer. This is because the upper house would need at least 20 days to discuss and approved before passing on to the National Diet (deadline 22 June), which implies that the approval from the lower house has to be obtained latest end-May.

Based on that we have gathered from the Asia Gaming Conference in Macau last week, if the bill is passed in the lower house but failed to meet the timeline mentioned above, the bill could stand another chance of passing in the Extraordinary Diet (to be held in Sept/Oct-14).

However if the bill could not be passed in the lower house, the bill would then need to be re-submitted in the next session, which could likely be next year.

Risks

1) Regulatory risk; 2) Further decline in RWS’ market share to MBS; 3) Weaker-than-expected hold percentage in the VIP segment; 4) Worsening in economic condition; and 5) Failure in casino license renewal.

Forecasts

Unchanged.

Rating

BUY

Positives – (1) Duopoly industry; and (2) Lower tax rates compared to regional peers.

Negatives – (1) Highly regulated industry; and (2) Earnings from gaming operations are highly dependable on luck factor and hold rates.

Valuation

Maintain BUY with unchanged TP of SG$1.68 based on FY15 EV/EBITDA multiple of 9.5x.

Source: Hong Leong Investment Bank Research - 30 May 2014