Genting shares fall on US project setback

PETALING JAYA: Shares of Genting Malaysia Bhd (GenM) and its parent Genting Bhd fell amid a broader market decline on news that the group’s plan to expand its New York operations had hit a snag.

GenM shed 15 sen to close at RM3.54, while its parent Genting lost 30 sen to close at RM9.70 yesterday, when the broader market sank deep in the red due to fresh concerns over the health of the global economy.

GenM’s plan to build a US$4bil convention centre at Aqueduct Racetrack in Queens, New York, suffered a major setback after the state governor Andrew Cuomo said last Friday that negotiations with the Genting group had broken down.

The convention centre would have been an extension to GenM’s existing project, called Resorts World New York.

Cuomo was also reported to have said that the state was entering into negotiations with other gaming companies, and would set up a competitive bidding process to consider other casino plus convention centre proposals next year.

GenM in a statement to Bursa Malaysia said Genting New York LLC, an indirect wholly-owned subsidiary, would participate in the bid process for the convention centre when it is announced.

“This is a negative surprise and represents yet another setback for the company’s overseas expansion,” CIMB Research wrote in its report.

It thought the proposed project in New York could have strengthened GenM’s case for one of seven new full casino licences that would be issued in the state, following a recent constitutional amendment.

CIMB Research maintained its “neutral” stance on GenM shares, with an unchanged target price of RM4each. The same ratings had been ascribed by Maybank Investment Bank Research (MIB) on GenM shares.

“We leave our estimates unchanged, as we have not imputed any contributions from a potential full casino either in New York or Florida,” MIB said in its report.

GenM’s plans to build a US$3bil casino resort in Miami, Florida, had earlier faced some difficulties after the Florida legislature in February postponed the tabling of a bill to expand casino gaming in the state.

MIB noted its concern that recent developments seemed to suggest GenM’s chances of expanding via merger and acquisition had shrunk markedly.

If GenM failed to secure its own casino, its RWNY’s existing video lottery terminal operations would be subject to more intense competition, MIB said, adding that it had forecast RWNY to contribute 8% to 9% to core group earnings.

Hong Leong Investment Bank Research, which had called for a “hold” on GenM with a target price of RM4.10, said it believed the company would continue to “look out for other potential opportunities internationally, given its strong net cash and free cash flow position”.

Already, GenM’s sister company, Genting Singapore plc, was said to be eyeing Australian-listed Echo Entertainment Group Ltd.