Genting, Dreamgate likely winners from Macau gaming business - Friday 12th of August 2005

THE odds are strong that Genting Bhd and slots machine distributor Dreamgate Corp Bhd will emerge as winners from Macau’s fast growing gaming sector.

Macau — where gaming revenue is forecast to rise 20 per cent in the next four years — is currently a big construction site with multiple casino and leisure complexes under construction.

Among the developments in downtown Macau include the Wynn Hotel, Grand Lisboa and MGM Hotel.

Several works are on-going in the Kotai Strip where one can see development from Melco-PBL joint-venture through the Park Hyatt chain, Venetian as well as Galaxy. Casino mogul Stanley Ho currently owns Melco while PBL is owned by Australian tycoon Kerry Packer.

According to JPMorgan’s Asia Pacific Equity Research — of the three casino concession holders in Macau — Ho’s casino group Sociedade de Jogos de Macau (SJM) had already awarded two “sub-concession? to PBL and MGM. The other two concession holders are Wynn and Galaxy.

In a report two months ago, the Lim family, which controls the Genting Group, had increased its stake in K. Wah Construction (the company behind Macau’s Galaxy casino) to 6.01 per cent from 4.69 per cent.

K. Wah Construction plans to invest HK$5.7 billion (HK$100 = RM48.78) in the next five years in four new casino projects in Macau.

SJM, which currently has over 1,800 slot machines representing over 60 per cent of market share, has plans to put more effort to boost the revenue from this segment.

It said Dreamgate, the distributor of key slot machine brands in Asia, is a major beneficiary from the coming increases.

JPMorgan places an “overweight? call on both Genting and Dreamgate stocks with a potential upside of about 20.6 per cent and 42.28 per cent respectively.

It has a target price of RM24 for Genting and RM2.10 for Dreamgate stocks.

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