Monday, November 18, 2013

Genting HK faces headwind in Australia

Genting HK faces headwind in Australia
Business & Markets 2013
Written by Charlotte Chong of    
Monday, 18 November 2013 09:59

KUALA LUMPUR: The Australian authorities may have dealt Genting Hong Kong Ltd, in which Genting group’s Lim family controls a direct stake of 56.35%, a bad hand when the New South Wales (NSW) state government announced last week an agreement with Jame Packer’s Crown Resorts Ltd to build a A$1.3 billion (RM3 billion) complex that will include both a VIP casino and a state-of-the-art hotel complex at Barangaroo.

According to news reports, the deal isn’t final yet. Some approvals are required before Packer could kickstart the mega casino project. The Independent Liquor and Gaming Authority must approve Crown Resorts as a suitable casino operator, although this could be just a formality given Crown Resorts’ track record, and it has already passed similar tests in recent months.

Should the Australian billionaire businessman secure a second Sydney casino licence from the government to operate a new casino, Genting Hong Kong may have to choose either to face a casino battle with Packer or to dump its existing shares in Echo Entertainment Group Ltd, said a gaming analyst.

Prior to the agreement, Echo, in which Genting Hong Kong is the third largest shareholder with a 6.6% stake, was the sole casino operator in NSW.

Interestingly, Crown chairman Packer sold its 10% or 82.56 million shares in Echo in May this year for A$264 million, or A$3.20 per share — at a discount of 80 cents to the buy in price of about A$4 per share in 2011.

It was a smart move to dispose of the shares before getting the right to operate a new casino, “We can only assume that he probably knew it [getting the shares from the government] when he disposed them of,” said the gaming analyst.

The sale came only two weeks after Packer won approval from the Independent Liquor and Gaming Authority of NSW and the Queensland Gaming Authority to lift his stake in Echo to 23%. However, Packer has aborted the mission after he had spent almost 15 months on the approval process.

“When Genting [Hong Kong] bought the shares in Echo, it was betting that the state government won’t issue another licence,” he said, adding that Echo was supposed to have the monopoly until 2019.

It has been reported that Packer’s initial move in acquiring Eco shares was to use the 10% stake as a leverage and “lend” its licence to enable Crown to operate a new casino, given that Echo had an exclusive casino licence until 2019.

To counter Crown’s plan to build the iconic 250m casino resort tower, Echo is seeking an extension of its exclusive licence to beyond 2019 and has committed to investing in the A$1.1 billion redevelopment bid.

It is worth noting that Genting Hong Kong’s sister company Genting Singapore Plc, which is 51.96% owned by Genting Bhd, once acquired a 4.8% stake in Echo in June 2012. Merely after three months, Genting Singapore placed out its entire stake at A$3.99 apiece for A$158 million.

In an earlier interview with the media, Genting group chief Tan Sri Lim Kok Thay said Genting Hong Kong would still boost its stake in Echo and wait for the authorities to grant the approval to increase it to beyond 10%.

However, with the new licence being issued by the NSW state authorities, will Lim change his mind on raising stake in Echo?

This article first appeared in The Edge Financial Daily, on November 18, 2013.

Publish date: 18/11/13

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