Top Reasons Genting Is A Winner

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Dec 11 2006
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The top business news since last Friday were the official announcement of Genting International (SIN : G13) & Star Cruise Ltd (SIN : S21) winning the Singapore second casino on the Sentosa Integrated-Resort (IR) island projects and how everyone should keep an eye on this new casino giant. The news was pickup not only within Asia but international ranging from Wall Street, AP, Financial Times, Reuters, Bloomberg and so on.

There’re numerous reasons which have been circulated from the rumor-mongers on the street to the top analysts speculating and reasoning why Genting International, a subsidiary of Genting Berhad (GENTING, stock-code : 3182) will win the second casino after lost a bid earlier for the first casino license in Singapore to Las Vegas gaming giant Las Vegas Sands Corp. (NYSE : LVS, quote).

Singapore, which pride of being able in transforming itself into the most developed country within Asean despite having no natural resources whatsoever is fast losing its’ long dependence on manufacturing sector which helps build the nation. China has taken over the place, so Singapore needs to divert to other sectors to keep the nation going forward. It has started Bio-Tech from the day its’ neighbouring countries were still trying to digest the meaning of it. Its’ Information Technology industry, despite being the latecomer compare to Malaysia’s MSC (Multi-Media Super Corridor) is currently the leader within the region. The other two sustaining old sectors namely financial and business hubs and tourism heaven are facing tough competition. It needs to find a new “source” of revenue, and casino is the answer.

Let’s digest some of the reasons why Genting won (without any particular order):
  1. Singapore Government Strategy – Singapore, which has awarded (no one thought of Singapore’s two licenses plan at the first place) the first casino license to Sands is cautious not to put everything into a basket (talk about smart government). The ideal situation would be to award one license to a western country (someone said it’s a political reason from the perspective of the nation security) and another one to a strong, efficient and proven market player – Genting Group fit perfectly for this role. Furthermore, majority of Genting Berhad’s customers at the hill-top casino are Singaporean – so why not bring this casino nearer to its’ own territory with the benefits of tax-revenue? It makes perfect sense.

  2. Political Pressure from Government of Malaysia – Since the current Prime Minister, Abdullah Badawi took over the office and walk the corridor of powers, the Malaysia policy towards Singapore has taken a 180 degrees to an improvement in bilateral relations. Cash-rich Temasek Holdings, the investment arm of Singapore Government which has over US $ 80 billion in business diversification has aggresively buying into Malaysia’s assets such as Telekom Malaysia (TM, stock-code : 4863), Alliance Bank and the controversial Pantai Hospital (PANTAI, stock-code : 8036). The recent outburst from Deputy Prime Minister Najib Tun Razak has called for more reciprocity from Singapore in facilitating Malaysian acquisition of assets in the island republic as the number and size of acquisitions by Singaporean interests (especially Temasek Holdings) had far outweighed Malaysians’ acquisitions of Singaporean companies. This could add pressure to Singapore Government in Genting bid for the second casino project.

  3. Genting is equally enthusiast to diversify – the willingness to pump more than S$ 5 billion into the project only shows how desperate Genting Group is in overseas diversification of it’s huge cash-pile instead of relying on local markets within Malaysia. Besides, the talk of 30% and the most recently 60% of business shares allocation for Malay-Bumiputera ethnic under NEP (New Economic Policy) has cause much dis-comfort within chinese-based business communities (though not publicly voiced). What better way to safeguard Genting assets if not to relocate in disguise of diversification? The second generation of Lim Goh Tong, Lim Kok Thay is definitely not taking any chances if the decades built hard-earned billions is at stake. Anyway, he’s learning fast from Robert Kuok what the Lim senior didn’t.

  4. Nusajaya – South Johor Economic Zone factor – the new US$ 4.8 billion project with the land size of roughly 2.5 times the size of Singapore launched by Abdullah Badawi is said to primarily tapping into Singapore’s prosperity (Nusajaya is near the Second Link in southern Johor) and converting the area into the ambitious plan equivalent to Shenzhen or Singapore. There were rumors that Badawi was trying very hard during his recent visit to Japan talking to Tokyo Disneyland in order to bring Disneyland to Nusajaya. Singapore might see this as a threat (definitely not Disneyland but a casino) if Genting is not awarded the second casino in Sentosa IR.

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