Merrill Lynch sees Singapore casinos costing RM18.89 billion
Intense competition among global gaming groups to develop Singapores two casino resorts will push the combined investment to about US$5 billion (RM18.89 billion), according to Merrill Lynch.
The 12 bidding groups, which include major US players such as Wynn Resorts Ltd and Las Vegas Sands Corp, could face a greater need for equity funding given the scope of investment.
"The scarcity of new casino opportunities globally coupled with the economic growth in East Asia has focussed the attention of all major casino groups in Singapore," Merrill Lynch analyst Sean Monaghan said in a note to clients.
The US investment bank previously estimated total cost for the two developments to be between US$3.5 billion and US$4 billion.
The casino planned for the city-states waterfront Marina Bayfront "will likely be among the most expensive ever developed" at around US$3.1 billion, while the gaming development on the resort island of Sentosa could cost US$2 billion.
Bidders for the downtown Marina site will also likely face a two-envelope bidding process designed to maximise the winning price when the government launches a formal request for proposals in August, he said.
The government, which has stressed that it wanted architecturally "iconic" developments, would probably shortlist three to five bidding consortiums first based on criteria such as design.
"The second envelope would contain the amount the syndicate is prepared to pay for the land at Marina Bay. We understand that the highest bidder for the land among the shortlisted parties will be awarded the casino licence," said Monaghan.
Land around near the casino site was sold by the government this month for S$4,101 (RM9,334) per square metre or S$381 per square foot. At those prices, the Marina plot could cost the winning gaming operator S$2 billion.
But Monaghan doubted the land cost would be this high as the government would likely want to maximise long-term returns rather make a short-term gain.
Merrill said it has a "buy" recommendation on CapitaLand Ltd and Keppel Land Ltd as both Singapore property developers offer "direct exposure to the bidding process".
CapitaLand has partnered MGM Mirage on the Marina development and Kerzner International Ltd for the other site.
Keppel Land Ltd has teamed up with Harrahs Entertainment Inc to bid on both sites.
Successful syndicates are expected to be announced after December with construction starting in 2006 and resorts to open in 2009. - Reuters
2005-07-12
