Genting Malaysia poised for upside as frontrunner for one of three New York casino licences

[KUALA LUMPUR] Genting Malaysia is a frontrunner for one of three casino licences to be awarded for downstate New York, analysts said, and its shares have not yet priced in this possibility.

The New York State Gaming Commission in August resumed its request for application (RFA) process, which had been halted for six months.

Genting Malaysia’s Resorts World New York City (RWNYC) and MGM Resorts are seen as strong favourites to win full casino licences in New York. Other competitors include Las Vegas Sands and Wynn Resorts.

UOB Kay Hian investment analyst Jack Goh said that RWNYC has a deep-rooted presence in New York City and the support of local communities, having given over US$3 billion to public education funding.

“Securing the downstate gaming licence will allow RWNYC to unleash its potential as a full-scale casino operator with mobile sports betting licences, rivalling competitors in upstate New York and Las Vegas,” he told The Business Times.

A full-fledged casino licence will also enable RWNYC to reconfigure its existing gaming premises to feature casino table games that are potentially taxed at lower brackets of 10 per cent. Its existing electronic gaming devices are subject to a 65 per cent tax rate.

Genting Malaysia owns and operates Resorts World Genting – the only licensed casino property in Malaysia. It also runs casinos in the United States, the Bahamas, the United Kingdom and Egypt.

In the US, Genting Malaysia operates Resorts World New York City, Resort World Catskills and Resorts World Hudson Valley.

Ng Zhu Hann, chief executive of boutique fund manager Tradeview Capital, said that Genting Malaysia’s close relationship with the native Mashpee Wampanoag tribe is another point in the gaming company’s favour.

Genting Malaysia had subscribed to promissory notes issued by the Mashpee Wampanoag tribe in 2016 for an integrated gaming resort development in the US. The total investment was US$426 million (including accrued interest).

In a report on Sep 10, Maybank noted that the tribe has revived plans for its First Light Resort and Casino.

“The tribe has formally requested a meeting with the Taunton City Council to discuss the resuming construction. If this also goes through, it will boost Genting Malaysia’s net profit by around RM180 million (S$52.4 million) a year,” it said.

Maybank further estimates a downstate casino licence could add around RM610 million to Genting Malaysia’s core net profit.

For the first six months of 2023, Genting Malaysia’s revenue increased 22 per cent year on year to RM4.8 billion.

It recorded RM19.7 million in net profit, reversing from a loss of RM137.4 million in the year-ago period.

Shares of Bursa-listed Genting Malaysia closed at RM2.51 on Wednesday (Sep 27), which is below where it closed on Sep 1 – after news of the RFA surfaced.

Ng said that the price indicates the market is taking a wait-and-see approach. A licence win “will spur investors’ interest in Genting Malaysia with the anticipation of improved earnings outlook”, he added.

Outside Malaysia, Goh and Ng have confidence in Genting Malaysia’s capability in competing with other peers overseas.

“Genting Malaysia not only managed to secure the first ever gaming licence in New York City; RWNYC has been recording positive earnings before interest, taxes, depreciation and amortisation since its opening in 2012,” said Goh.

He expects competition in downstate New York to be “less intense” than in Macau or Las Vegas, as only three licences will be awarded. This will enable Genting Malaysia to tap the “underserved New York City market”, which attracts over 60 million visitors a year.

Ng noted, however, that the winning of an additional casino licence would mean a sizeable investment on Genting Malaysia’s part. “It might take a few years for it to break even or to be profitable.”

The RFA sets a minimum requirement of US$1 billion for both the licence fee and capital investment. Other criteria include job creation, tax revenue and other output factors.

Genting Malaysia has not disclosed its planned investment in the new casino in New York, but other bidders have guided for investment amounts of up to US$5 billion.