Genting expands gaming interest with Macau buy - Tuesday 12th of April 2005

THE Genting group, which is on a mission to expand its gaming business beyond Malaysia into Singapore and elsewhere, is said to have bought a stake in a casino in thriving Macau.
Reuters, citing unidentified sources, reported yesterday that the group’s founder and main shareholder — Tan Sri Lim Goh Tong and his family — paid US$102.6 million (US$1 = RM3.80) for a 6.9 per cent stake in Hong Kong’s K. Wah Construction Materials Ltd, which is buying the Galaxy Casino in Macau.

The deal was part of a US$150 million share sale by K. Wah to fund the US$2.36 billion Galaxy purchase, it said.

K. Wah is to re-name itself Galaxy Entertainment Group and will be the first Macau casino to be listed on an exchange.

Genting officials, when contacted by Business Times, declined to comment.

Genting Bhd’s share price rose sharply to a six-week high in reaction to the news, on its strongest volume yet this year.

It moved up 5.5 per cent (RM1) to an intra-day high of RM20.20 before coming off to close just 3.3 per cent (60 sen) higher to RM18.80. Volume more than doubled to 3.7 million shares.

Analysts said the development, if true, was a step in the right direction for Genting, which needs to expand beyond its traditional domestic market to remain competitive.

Galaxy holds one of three casino licences in Macau, which is one of the world’s biggest gaming hubs.

Gaming revenue in Macau, the only place in China where gambling is legal, reportedly rose 44 per cent to US$5 billion last year, and is still booming.

With competition also to come from Singapore come 2009, Genting needs to do something to protect its gaming interests.

“Genting needs to grow elsewhere because of limited opportunities in Malaysia,? said Vincent Khoo, Hwang-DBS Vickers’ research head.

Sitting on a cash pile of RM2.2 billion as at the end of last year, Genting has more than sufficient resources to make such acquisitions.

It has bid, together with Universal Studio’s theme park unit, for the right to a casino licence in Singapore, and just a few days ago, it increased its stake in the UK’s largest casino operator, Stanley Leisure plc, to 19.1 per cent,

“They’re now playing their version of roulette — placing bets around the region and waiting to see which one pays off,? observed a fund manager who helps manage some RM1.5 billion.

Macquarie Research Equities said these are exciting times for Genting.

“This is a growth stock, with multiple growth opportunities in the UK and Singapore,? it said in a research note to clients.

The majority of stockbroking houses are positive on Genting’s shares, their target prices ranging between RM20.50 and RM25 apiece.

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