- Bloomberg quoted New York Governor, Andrew Cuomo as saying
that discussions with Genting Group for the development of the US$4bil
convention centre in New York City, have failed. Recall that the convention
centre would have been an extension of “Resorts World New York” (RWNY).
- The failed negotiations mean that Genting Malaysia Bhd
(GenM) will no longer have exclusivity over the project. GenM will have to bid
for the project with other casino companies in the future. Cumo said that he
plans to open up a bidding process in FY13F after lawmakers allow a
constitutional amendment that would allow casinos in New York.
- According to a Genting spokesman, uncertainties and
difficulties regarding the constitutional amendment, competitive landscape, tax
rate and infrastructure support, made any decision difficult.
- We reckon that it would have been challenging for GenM to
build a convention centre if the tax rates were not lowered or if there were no
exclusivity to the project.
- Currently, RWNY pays 70% of its gross revenue in the form
of taxes and other contribution to various agencies in the state of New York.
Without a reduction in the tax rate, it would have not been possible for the
convention centre to be profitable.
- With the convention centre cum casino project now open to
a bidding process, GenM would be able to come up with a more cost-efficient
design, which accommodates the current effective tax payments. This means that
the convention centre cum casino could cost less than US$4bil.
- We believe that the state of New York is still open to the
idea of casinos. We reckon that the legislative process would be completed by
November 2013. Any bidding process would be held after that. Construction of
the project, if any, would start in FY14F.
- After New York, the next agenda would be the legislative
sitting in Florida. Lawmakers are expected to start debating on the
liberalisation of the casino industry again from January to March 2013.
- GenM’s share price is expected to react negatively to the
above development in New York. Nevertheless, we reckon that the group’s
fundamentals are still intact and as such, we are keeping GenM as a BUY.
Source: AmeSecurities
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