Malaysia’s Genting boosts moves to venture overseas

(source: AFP 17 September 2006)

Malaysia’s Genting boosts moves to venture overseas
Posted on Sunday, 17 September 2006

Malaysia’s sole casino operator, the Genting Group, is bolstering its efforts to expand overseas amidst an ever-more competitive casino market in Asia by staking a claim in Britain.

KUALA LUMPUR (AFP) – Genting, which started as a casino resort, but diversified to include leisure and power operations, set Malaysian markets buzzing last week, announcing it would acquire British casino operator Stanley Leisure.

The group’s Singapore-listed unit, Genting International, which owned 19.8 percent of Stanley Leisure before the deal, will increase its stake to about 30.5 percent, triggering a general offer for the entire firm.

Analysts say the conglomerate is anxious to build a presence in Britain, which last year relaxed its gaming laws to allow a slew of new casino licences to be awarded.

Genting’s bid for Stanley Leisure, Britain’s largest gaming company, demonstrated “flexible and aggressive management” in a strategy to expand globally, said Vincent Khoo, an analyst with Hwang-DBS Vickers Research.

“The acquisition … provides Genting the avenue to diversify from its Malaysian casino base and to participate in the anticipated brisk growth in the under-penetrated casino business in the UK,” he told AFP.

Analysts say Genting planned to muscle in on the British market with a June proposal to merge Stanley Leisure with rival casino operator, London Clubs International PLC (LCI), in which Genting holds a 29.7 percent stake.

Those ambitions were thwarted in late August when LCI accepted a takeover offer from US gaming giant Harrah’s Entertainment Inc.

While Genting’s acquisition of Stanley Leisure was hotly anticipated, its shares fell sharply Tuesday, the day after the purchase, losing 0.60 ringgit or 2.4 percent to 24.40 ringgit (6.65 dollars) on profit-taking, recovering slightly to close at 24.50 on Friday.

In addition, Khoo said Genting’s share price had come off in the short-term because of perceptions the acquisition price was too steep.

“But strategically it is a good plan for the group, going forward,” he said.

Genting is controlled by the family of tycoon Lim Goh Tong, 86, an astute entrepreneur regarded as one of Malaysia’s legendary success stories.

Lim, an ethnic Chinese who only speaks the Hokkien dialect and a smattering of the national Malay language, in 1971 secured a casino license within six hours of applying for it in the mainly-Muslim nation.

While gambling is a sin in Islam, the Genting Highlands hilltop casino resort, and associated hotels and a theme park, have faced little protest because of their tourism allure, drawing more than 15 million visitors yearly, including from Southeast Asia.

The group made a hefty net profit of 1.2 billion ringgit in 2005, with its casino operations, run by subsidiary Resorts World, the biggest revenue contributor.

Beyond a foothold in Britain, analysts also hailed Genting for trying to diversify its earnings base and reduce risk to its Malaysian casino resort in the face of growing regional competition.

Asia-Pacific governments and companies from Australia to the Chinese enclave of Macau are building more casinos, lured by the revenue and greater tourist arrivals as their social stigma fades away.

Last year, neighbouring Singapore lifted a ban on casinos, announcing it would allow two to be built which are expected to compete head-on with Genting’s casino resort.

Genting International lost its bid for one of the licenses, but is still in the running for the second, to be announced by the end of the year.

The acquisition “will allow them to diversify their interests away from the more competitive landscape in Asia,” said a research note from brokerage TA Securities.

“With … only single-digit to low double-digit growth expected for Resorts, it is a good move for Genting to seek greener pastures,” added brokerage firm OSK Research.

Lim, in writing the story of how he came to build the Genting Highlands casino resort for the group’s 35th anniversary in 2000, said he initially intended it as retirement getaway.

He saw the resort’s potential as a tourist attraction because its cooler, highland climes provided a respite from tropical weather, but it had transformed beyond his expectations.

“Genting Highlands is my labour of love. I have spared no efforts in striving for its perfection,” he said.

Date Posted: 17-Sep-2006