Genting Malaysia (GENM) announced that it has submitted its application
to participate in the selection process to develop and operate a casino
in New York State on 30 June 2014. According to media reports, the
Group had submitted two bids – one for a casino in Hudson Valley and the
other in Tuxedo to boost its chances of being selected. We are neutral
on the development, as these casinos would be located in upstate New
York which is less populated compared to downstate where Manhattan is
located. Furthermore, competition will be fierce with a total of four
new casinos to be built, in addition to five existing full-scale Native
American casinos and nine racinos in the state.
Four casino licences in New York State. To recap, the New York Gaming Commission has called for bidding proposals for up to four casino licences for gaming facilities to be built in upstate New York. Bidders are required to invest at least USD350m to develop the facilities. At the closing date, 16 companies have submitted a total of 17 bids, with applications focusing on three regions – the Catskills and Hudson Valley, the Capital area and the Eastern Southern Tier. The two locations submitted by GENM are located in the former which is considered a prime location due to its proximity to New York City, with Tuxedo being a mere 41 miles from Manhattan while Montgomery is 70 miles away.
Details of proposal. For Tuxedo, the Group had proposed a 238-acre resort on the current site of the Tuxedo Ridge Ski Center, dubbed the Sterling Forest Resort which would include a casino, two hotels, restaurants and facilities for year-round outdoor recreation including skiing. The development is expected to incur capex of USD350m, which is the minimum required by the New York Gaming Commission. As for Montgomery, the Group proposed a USD500m project dubbed Resorts World Hudson Valley. It is worth noting that the latter was a last minute pitch that won the unanimous approval of all three villages in the town of Montgomery.
Maintain Neutral with unchanged TP of RM4.35. While another casino in New York will complement the Group‟s existing racino operation, we are neutral on the prospects in view of the stiff competition and less attractive gaming market in the US. Revenue from New York‟s existing Native American casinos declined in 2012, one of six states nationally to record a decline in gaming revenues. We believe however the Group will see a boost in 2016 mainly from its expansion in Resorts World Genting, but maintain Neutral for now with unchanged TP of RM4.35 based on SOTP valuations.
Source: PublicInvest Research - 2 Jul 2014
Four casino licences in New York State. To recap, the New York Gaming Commission has called for bidding proposals for up to four casino licences for gaming facilities to be built in upstate New York. Bidders are required to invest at least USD350m to develop the facilities. At the closing date, 16 companies have submitted a total of 17 bids, with applications focusing on three regions – the Catskills and Hudson Valley, the Capital area and the Eastern Southern Tier. The two locations submitted by GENM are located in the former which is considered a prime location due to its proximity to New York City, with Tuxedo being a mere 41 miles from Manhattan while Montgomery is 70 miles away.
Details of proposal. For Tuxedo, the Group had proposed a 238-acre resort on the current site of the Tuxedo Ridge Ski Center, dubbed the Sterling Forest Resort which would include a casino, two hotels, restaurants and facilities for year-round outdoor recreation including skiing. The development is expected to incur capex of USD350m, which is the minimum required by the New York Gaming Commission. As for Montgomery, the Group proposed a USD500m project dubbed Resorts World Hudson Valley. It is worth noting that the latter was a last minute pitch that won the unanimous approval of all three villages in the town of Montgomery.
Maintain Neutral with unchanged TP of RM4.35. While another casino in New York will complement the Group‟s existing racino operation, we are neutral on the prospects in view of the stiff competition and less attractive gaming market in the US. Revenue from New York‟s existing Native American casinos declined in 2012, one of six states nationally to record a decline in gaming revenues. We believe however the Group will see a boost in 2016 mainly from its expansion in Resorts World Genting, but maintain Neutral for now with unchanged TP of RM4.35 based on SOTP valuations.
Source: PublicInvest Research - 2 Jul 2014
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