Genting Malaysia - Lawmakers in NY to allow seven casinos? BUY

- According to news reports, lawmakers in New York agreed to amend the state constitution to allow up to seven casino operators last week. 

- Apart from Genting Malaysia Bhd (GenM), other well-finance groups vying for the licence include the Las Vegas operators and Indian tribal groups, all of whom have hired their own lobbyists and consultants.  

- According to the same article, expectations are that the seven full casino licences would go to the highest bidders though the “Times Union” report said that New Yorkers seem equally opposed and supportive based on some recent polls.

- Details on the seven casinos for New York including the locations will reportedly be determined only in 2013. But New York can legalise casinos if two successive legislatures enact bills and voters approve the legislation.

- We view this development positively as the legislative process in New York seems to be in favour of liberalising the casino industry. It appears that compared to Miami, there is less negative newsflow on the setting up of a full-fledged casino in New York. 

- We reckon that GenM would need a full-fledged casino licence if it were to proceed with the US$4bil re-development of the Jacob Javits Convention Center, which would also involve the construction of hotels, museums and residential properties. 

- GenM has said that it would be working closely with the Empire State Development Corporation of New York to negotiate terms of the project with a view of entering into a binding Memorandum of Understanding before or on 30 November 2012.   

- We believe that GenM with its net cash of RM967.1mil as at end-FY11 would not have problems bidding for the casino licence in New York. 

- However, we reckon that GenM would prefer to have an exclusive casino licence in New York instead of sharing the casino industry with six other players (assuming the group wins the casino licence, if any).   

- We maintain a BUY on GenM for its growing exposure  to the casino industry in US and Britain. Also, GenM’s domestic casino operations are resilient, providing stable and recurring cashflows annually.

Source: AmeSecurities