Any Chance for Genting?

Posted: May 27, 2009 in Uncategorized

Any Chance for The “Highlander” to Enter Macau?  Enter Macau

Contributed by: Expert IR

May 27, 2009

The recent press reports as well as many investment analysts were excited about Genting International’s (or Genting Singapore as they changed its name) next move might be Macau – the Holy Land of world’s gaming hubs.

The Malasian newspaper reported as follows:
Genting group’s recent subscription of US$100mil senior secured MGM Mirage Inc notes has raised the possibility of Genting’s potential entry into the Macau gaming market, say analysts.

CIMB Investment Bank said it would not be surprised if the subscription was more than an interest-yielding exercise given recent press reports that the New Jersey Division of Gaming Enforcement has advised that MGM Mirage should be directed to disengage from its Macau joint venture (JV) partner Pansy Ho, who has a 50% stake in MGM Grand Macau.

If complications in the MGM-Pansy Ho JV led to the departure of either party, Genting group’s subscription to the bonds would not hurt its chances of potentially filling the void.”

Even the Macau daily tries to promote such a scenario with much hopeful thinking.

The most important issue of all remains, this is not a normal business acquisition and transaction, it is about who is allowed (by the Macau & Chinese government) to enter the playground of the territory’s gaming arena.

The so-called “matched marriage” arrangement had happened in the territory’s bidding for casino license in 2002. In that, Las Vegas Sands was literary matched with Galaxy Entertainment Group in order to gain its entry into the hub of Asian gaming. Otherwise, the history of Macau or more aptly, history of Las Vegas Sands would have to be re-rewritten.

Now let’s look at the “Highlander of Genting Highland” – Genting International. My assessment of their chances of gaining a ticket of re-entry into Macau S.A.R. will be a very long shot indeed, if not necessary mission impossible. Assuming that MGM Macau eventually has to divorce Pansy Ho.

As my prediction of the outcome is unlikely be based solely on financial implications and normal business transaction per se, I would highlight the following ‘ingredients’ that could ‘disqualify’ the Highlander.  

–          A significant new comer into Macau, currently an extremely crowded playground he must pass the test with both the Chinese and Macau government. Is Genting Group a desirable bridegroom? From some insiders’ observation, the past decade of Genting’s investment in mainland China especially through Star Cruises has been at best luke-warm status. In fact, it was known that Genting’s first round of contest for the 2002 bidding for a license in Macau was treated just a sideshow as regarded by the authority. Simply put, the Chinese did not view them as a serious player in the game.  Has the situation changed since then? I doubt so.

–          It can be viewed as a serious violation by Genting Group to have linked up with Pansy Ho’s joint venture in Macau, as regarded by the Lion City’s authority. The earlier violation by Star Cruises’ JV with Stanley Ho is a case in precedence. And hence Star Cruise had to breakaway from the IR investment in the Lion City.

–          After 6 years of hard battles with the Americans and living with them side by side, both the authority and local business entities (including Stanley Ho) in Macau would have known that the fear of losing the entire gaming market share to American’s machinery is no longer a serious threat. And the upside of introducing international practices into Macau has been a right move. It is therefore unlikely to break the current balance and bring in yet another Asian Chinese casino player who is deemed to be of little contribution to the market. Instead, I would think that a totally new player say, from India or European continent might be more desirable. That idea could really make Macau truly a shining star in Asia with even greater diversity.

–          Another hidden bridegroom out there is considered by me to be far more attractive than the Highlander. With the KMT in power, the earlier taboo of not allowing a Taiwanese capital-based investment to enter Macau’s gaming arena is now not so unthinkable. Sands had almost ruined its only chance during the bidding stage because they had invited a Taiwanese entity as partner. In those days, that was a suicidal move. But the dark cloud of cross-straits relation had passed. It is not so remote an idea now to casually allow a new player from across the straits. Imaging the impact of literary linking up Taiwan with a Chinese territory to up the ante on direct tourism between China & Taiwan… under great concept of the late Deng Xiao Ping, One-country-two-systems.   

–          Lack of success story. Unlike the rest of the American casinos and Lisboa in the first bidding in 2002, Genting Group has yet to produce a success story during its past decade of business development and any smart investment in Asia or other part of the world. The continued huge losses of UK Genting Stanley Casino investment and the running down of Star Cruises do not speak loud for the group’s management skills. With two more large scale projects on their plate (Singapore and Philippines) at this current economic turmoil, I seriously do not think that Genting Group will be viewed as a wholehearted potential bridegroom to meet the qualifying criteria of the Chinese authority.

Hence, it is not just about being eager to invest and financial risk calculation. There is much to prove by the Highlander in that, in the first place how they are viewed in the eye of the ‘Bride and her parents’.

In marketing terms, it is Unique Selling Proposition that Genting Group must prove beyond any doubt, in order to gain that ticket into the arena.

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