Genting may take on American casino giants
Posted by Bev Freeman on 31 Jul 2009 at 10:07
Malaysian gaming company Genting could be getting ready to take on some of the big American casino names as it looks to expand around the world.
The Star Online says Asia's biggest operator of casinos is looking to grow when its American rivals are struggling with debts and may have to start selling assets in an effort to keep going smoothly.
Recently the company bought 3.2 per cent of stakes in MGM Mirage, the biggest operator in Las Vegas, which fired rumours that the firm could follow up by buying MGM's stake in its business in Macau.
The Star also said that Genting could even snap up casinos which go on sale in America, as it has over $2 billion in cash.
However, the company is facing competition in the areas is looking to expand to and also faces the fact the global economy is still struggling.
Quoted by the Star online, UBS analyst Alain Lai said: "Growth is limited in Malaysia and Singapore and they have money to spend. Now’s probably the best time to actually buy something.
"Certainly, the returns aren’t going to be as attractive as in Malaysia because Malaysia is a monopoly."
Genting Group brings in about 70 per cent of its profits from local business, and also runs palm oil plantations and has interests in power and property.
It has put these additional businesses, which account for about 30 per cent of revenue, up for sale.
Genting also has businesses overseas, including Stanley Leisure, the biggest operator of casinos in Britain. However, this and other interests have been hit by a slowdown in the world economy, while Britain's ban on smoking has also impacted trade.
However, officials have maintained the company is determined to push on with expansion as it aims to become one of the biggest companies in the sector in the world.
The firm runs Malaysia's only casino and also owns the Asian cruise operator Star Cruises.
If first burst onto the scene in 1965, being founded by Tan Sri Lim Goh Tong who oversaw the group's construction of a gaming resort in Malaysia.
According to the Star, stock in Genting has rocketed 85 per cent so far in 2009, while Malaysia's broader market has only gone up by 35 per cent.
The company has also long been linked with getting a foothold in Macau, China, where American companies and the famous tycoon Stanley Ho still hold the larger market share.
Macau is expected to be more resilient and recover faster than the likes of Las Vegas, and already has the likes of Wynn Resorts, MGM and Melco Crown running interests in the enclave.
Speculation has grown that Genting might end up buying MGM's Macau stake, however, others think the initial investment in the American firm will be used as a foothold towards expansion.
The company has repeatedly been linked with a buy-out of MGM's 50 per cent cut in a joint partnership it has with Stanley Ho's daughter Pansy in Macau.
Jonathan Galaviz, of the consultancy Globalysis said of the firm's expansion moves: "There is clearly an opportunity for strong firms to poise themselves to capture the momentum of the next economic upturn,".
According to the Star Online, Melvyn Boey, of Bank of America-Merrill Lynch, added: "We see the potential of the group raising up to US$3.9bil in financing ... if one assumes a 60:40 debt equity ratio, Genting can target up global gaming assets of almost US$7bil,".
Genting's hand could be strengthened by an integrated resort it is building in Singapore, due to open next year.
But the firm also faces the prospect of continued regulatory pressure from within Singapore, having already called off one partnership with Ho in Macau in 2007 after drawing heat from offiicials.
