The Face of the Redeemer

Atop the high mountain facing Rio De Janeiro, the face of the Redeemer shines in all its radiating resplendence.

A glance of its majesty quiets many a troubled heart and bring hope and joy to those in need of such affections.

See these pictures and bask in the glory of the Redeemer. 

GENM–STUNTED GROWTH WHIPPING BOY OF THE STABLE

Genting Berhad (GenBhd) has not really been fair to its minority shareholders. 

Seen from a narrow selfish perspective, minority shareholders would have loved good dividends and possible share offerings as part of their loyalty for holding on to the stock for such a long time sine the earlier split to a 10 sen par value per share.

Yes, it was blatantly clear that more than RM5 billion of cash reserve was partially used to make Genting Singapore (GenS) to appear like a princess at a coming-out ball. Today, GenS is a darling churning out extraordinary profits while Genting Malaysia slinered away as an unpolished diamond. Lim Kok Thay has demmed it fit to neglect GernM shareholders at the expense of making GenS and GenBhd to be the new winners.

Some may feel that Lim is justified to bail out GenS at the initial phase of its Sentosa operation rather than allowing its cash pile to remain idle. The bone of contention of many was he could just give them some special dividends instead of a nothing to you kind of choice. Now that  it is busy ploughing funds into its global expansion programme, we would have hoped that the share price would have gone up too. That sounds hollow too!

Yes, they have  been making some headway in the global leisure and hospitality industry over the last one year, gaining a foothold in the European and American markets.

GenM completed its acquisition of Genting Singapore plc's casino operations in the United Kingdom for a total cash consideration of 340mil (RM1.67bil) in October 2010. The operations there boast the largest number of casino properties in the United Kingdom, with 44 units, including five in London and have just begin to see some maiden revenue contribution to bottom line.

Last month, GenM took a real estate development venture gamble in Florida after the Aqueduct Racetrack video lottery facility project in New York City in August 2010. 

Be that as it may, we must all expect such endeavour to boost the company's earnings potential over the medium to longer term.

So let us have a snapshot of what is happening at GenM.

As at the end of the first quarter (Q1) to March 2011, Genting Malaysia had an estimated net cash of RM2bil. The company had an accumulated cash hoard of RM2.87bil at the end of financial year (FY) ended Dec 31, 2010, compared with RM5.25bil at the end of FY2009.

Genting Malaysia announced its acquisition of a 13.9 acres in Miami for US$236mil (RM718mil) last month. It plans to finance the deal through a combination of internally-generated funds and bank borrowings.

The acquisition, which was done through subsidiary Bayfront 2011 Property LLC, worked out to be US$390 per sq ft, which most analysts considered a fair price to pay for the premium location, and some considered the deal was to Genting Malaysia's advantage, given the still-strong ringgit against the dollar.

OSK Research's recent analysis of Genting Malaysia's Miami venture said GenM's cash hoard has rightly put the group in a position as first-mover in a potentially lucrative integrated casino market should Florida liberalise the industry. Do we dare hope for this as Aqueduct still do not have table games approved?

Gaming operations are currently banned from being built outside tribal lands by the state, although gaming giants such as the US-based Las Vegas Sands Corp have been lobbying to persuade lawmakers to allow for full casino gambling in the state.

According to OSK Research, casino income typically contributes more than 80% of Genting Malaysia's integrated property portfolios.

Hence, the liberalisation of the casino industry in Florida is crucial for the company to unlock value from its Miami investment. Read  ‘crucial’ to mean ‘not easy’.

Genting Malaysia has said that it plans to build a US$3bil (RM9.12bil) mixed development project comprising hotel, convention centres, restaurants, shopping malls and residential towers on the land it bought in Miami.

Last week, the company announced it had already appointed a local architect, Arquitectonica, to draw the master plan for its Resorts World Miami project, with the initial draft expected to be ready by the end of August.

What's missing at this point in time is the local authority's approval to build a casino operation there.

“Should it get a licence to operate a casino there, the payback for its investments in the Miami project would definitely be much faster, and that would serve as a much bigger catalyst in earnings potential,” an analyst explains.

According to market observers, the process of the company securing a casino licence in Florida, if it ever will, could take several years. How sad. Boo-hoo!

Hence, it is widely believed that Genting Malaysia would not rush into developing the Miami land. Pending further details, most analysts therefore remain neutral to mildly positive on the company's prospects there.

Meanwhile, construction of Genting Malaysia's New York operations is steadily making progress, with the opening of Resorts World New York slated for the fourth quarter of this year. Contributions from the New York venture will likely be more meaningful after its full launch in the first quarter of next year. So, watch the stock price after Chinese New Year 2012.

To recap, Genting Malaysia won the bid to develop and operate a video lottery facility at the Aqueduct Racetrack in New York City in September last year through its subsidiary Genting New York LLC.

The facility, now known as Resorts World New York, will feature about 4,500 video lottery terminals, convention halls and food and beverage outlets and other resort facilities.

Earlier reports said Resorts World New York could potentially contribute around RM600mil and RM200mil to Genting Malaysia's revenue and profits, respectively, by 2013. This estimate was based on an assumption of a daily win per terminal of US$300.

An analyst tells StarBizWeek that the initial period of Resorts World New York's operations could still likely be plagued by some teething problems that could affect earnings contributions, but the longer-term prospects remain bright, and could potentially generate better-than-expected earnings like what the group's UK operations did recently. So, GenM could still feel the whip for quite sometime till the porridge starts boiling.

GenM's UK casino operations have started contributing to the group's revenue since the fourth quarter of last year. In its latest reported quarter, contributions from the UK business were surprisingly strong that they lifted the company's earnings above market expectations.

GenM saw its net profit for 1QFY11 soared to RM417.7mil on revenue of RM1.95bil, compared with a net profit of RM272.3mil and revenue of RM1.35bil in the corresponding period last year.

In a statement, the group said it attributed its encouraging financial performance during the quarter in review partly to its UK casino operations, which generated a profit of RM60.1mil on revenue of RM346.6mil.

In the preceding quarter, GenM's UK operations actually posted loss of RM2.1mil on a maiden revenue contribution of RM188.4mil to the group.

“The group's UK operations seemed to have turned around now, and we expect earnings from the operations there to continue improving in the coming quarters, albeit at a more volatile rate, considering the uncertainties surrounding the UK's economy,” so claims an analyst.

But what's more reassuring, as indicated by GenM's first-quarter result, is the fact that the cannibalisation of market share, expected to result from the rising competition from the two new casinos in Singapore, did not seem to have happened at a scale that would significantly impact the company's existing casino and resort operations in Malaysia. 

“The company's core operations in Malaysia remain resilient despite the competition from the two casinos in Singapore, and this trend will likely continue in the coming quarters,” the analyst explains. Hopefully, it will recede in the following quarters.

Genting Malaysia's parent, Genting Bhd, holds a majority stake in the Resorts World Sentosa in Singapore, which happens to be the country's first casino resort.

Apart from a casino, the facility there houses the Universal Studios Singapore theme park, Marine Life Park, hotels and a host of other dining, shopping and entertainment offerings. The group's Singapore operations compete with the Marina Bay Sands casino resort built by Las Vegas Sands.

“Growth in Asia remains exciting for the industry, but in Malaysia, the market has already matured. Venturing abroad is the right option to diversify its business and avoid hitting a revenue plateau,” an analyst says.

I do hope Kok Thay will be more generous in the midst of making profits from the overseas ventures.

So, when are you proposing some goodies for GenM minority shareholders?