KUALA LUMPUR (June 5): Genting Malaysia Bhd (GenM) on Monday declared that it would still put in a bid to develop a convention centre in New York despite all the roadblocks it had faced in its effort to expand its gaming operations in the US.
In a filing with Bursa Malaysia on Monday, GenM said its unit Genting New York (Genting NY) would still participate in the bidding process for the convention centre when the exercise is announced. This came days after talks between Genting NY and the New York State Urban Development Corp collapsed.
The parties were not able to reach agreement on the terms for a proposed development of a US$4 billion (RM12.8 billion) integrated mixed-use complex that could come with a casino licence.
The complex, located next to Genting's Resorts World New York (RWNY) at the Aqueduct Racetrack in Queens, New York, would have significantly expanded the Malaysian conglomerate's footprint in New York.
In a note on Monday, Maybank IB Research warned that RWNY's existing video lottery terminal operations could face intense competition if GenM fails to secure its own full casino in New York.
New York Governor Andrew Cuomo was quoted last Friday as saying that the state had brought in other gaming companies to discuss potential proposals. This effectively ends the exclusivity Genting NY would have enjoyed had talks progressed without a hitch.
Genting NY and the New York state economic development agency had come to the table in January with a view of entering into a binding memorandum of understanding for the development on or before Nov 30. But after negotiations came to a halt, Genting NY said last Friday that any decision that could arise from the negotiations were made difficult by the "uncertainties and difficulties regarding the constitutional amendment, competitive landscape, tax rate and infrastructure support".
AmResearch said it would be challenging for GenM to build the convention centre if tax rates were not lowered or if there were no exclusivity to the project. The research house said that New York was still open to the idea of having casinos and that the constitutional amendments to pave the way for casinos should be completed by November 2013.
Legislators will have to decide whether to legalise commercial, non-native American casinos, which could enable racetrack casinos to expand into full-fledged casinos. Any bidding process would likely be held after next November, assuming the amendments are passed, with the possible construction of the project to start in 2014, AmResearch said.
The research house expects GenM's share price to react negatively to the developments in New York, but maintained its "buy" call on the stock for its intact fundamentals. GenM's share price fell 4.06% or 15 sen to RM3.54 on Monday, leaving it to hover near a six-month low of RM3.51 on May 16.
Aside from New York, attention is expected to shift to the battle Genting faces in Florida. The state's lawmakers are expected to start debating on the liberalisation of the casino industry in the first quarter of 2014 amid intense lobbying for casino operations by non-native Americans.
This story appeared in The Edge Financial Daily on June 5, 2012.
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