Too early to bet on Genting's gain from Japan's casino bill

KUALA LUMPUR (Dec 15): It is still too early to bet on the Genting Bhd group's gain from Japan's parliament passing a landmark bill legalising casino operations there, as a competitive bidding war is expected to be opened up by the development.

Genting Singapore Plc, which is 52.9% owned by Genting Bhd, has previously entered into a conditional sale and purchase agreement on Nov 11 this year to dispose of its 50% interest in the Jeju joint venture for US$420 million (about RM1.88 billion) to refocus on Singapore and possible venture into Japan.

However, with the details of the integrated resorts still needed to be laid out in a separate implementation bill before any casinos can be built, it is unlikely any of the casinos could be ready for the Tokyo 2020 Olympics.

Besides that, the competitive bid means that it is too early to expect Genting Singapore to benefit from the casino legalisation.

Nomura gaming analyst Harry C. Curtis shared that there will be an aggressive competition for the two to three expected licences in Japan.

"Profitability of casinos in jurisdictions with limited licences such as Singapore and Macau is more than compelling, so bidding in Japan (where the estimated size of gross gaming revenue is US$30 billion) is going to be intense," he said in a note on the approval of the casino bill in Japan.

Some of the potential competitors include local players such as Universal Entertainment Corporation and Sega Sammy Holdings Inc as well as international players like Las Vegas Sands, MGM Resorts International, Wynn Resorts Ltd and Hard Rock International.

Genting Singapore's share price has already seen a rally on the back of a surprised dividend, strong performance in the third quarter and the news on the passing of the gaming legislation in Japan. Currently, Genting Singapore is trading at S$0.965 (RM3), an increase of 28.7% since the beginning of November. The parent company, Genting Bhd, on the other hand has gained 5.96% since the mid-November.

With the backing of Prime Minister Shinzo Abe, the decade-long push to legalise casinos in the country may finally materialise, and a wave of speculation on the Japan gaming resort story may begin but as of now, it is best to just keep the champagne on ice.

Reaction to the casino bill on Bursa Malaysia was muted as Genting Bhd shares dipped 3 sen or 0.37% to RM8 while Genting Malaysia shares fell 3 sen or 0.65% to RM4.61 in the morning session today. — theedgemarkets.com