In a filing to Bursa Malaysia yesterday, GenM said New York Lottery announced on Aug 3 that its evaluation committee had unanimously recommended to the New York governor that Genting NY be awarded the aqueduct racino project.
“The recommendation will have to be approved by the New York governor, the temporary president of the New York State Senate and the speaker of the New York State Assembly before the video lottery licence can be awarded,” the company said.
GenM said Genting NY would work closely with the relevant parties, including the operator of the Aqueduct Racetrack, the New York Racing Association, and expected to open the preliminary phase of Resorts World New York six months after the award of the licence.
According to GenM, the video lottery facility, to be called Resorts World New York, would contain 4,500 electronic slot machines or video lottery terminals.
It said Resorts World New York would include a grand entrance featuring a three-storey atrium with a water show, enclosed skyway pedestrian bridge linking to the mass transit system of New York, 450-seat two-storey festive casual dining promenade and parking facilities for 7,000 cars, including a 2,200-car garage.
 An artist's impression of the Aqueduct Racetrack |
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Genting NY offered a whopping US$380 million upfront payment to the state which is US$80 million higher than what had been offered in previous rounds.
The news report said lottery director Gordon Medenica had stated the recommendation for Genting NY — the only remaining bidder — was based on the merits of the proposal and “vastly reinforced” by the offered upfront money.
“Genting’s proposal was far superior in concept, scope, detail, and execution to any we have seen in previous rounds of evaluation,” Medenica said in his recommendation letter.
Meanwhile, HwangDBS Vickers Research said the state may approve the bid sooner rather than later given its dire financial state, but there could be further hiccups although a state judge had earlier dismissed the lawsuit by Aqueduct Entertainment Company (AEC), which was the previous winning bidder whose licence application was later denied.
The research house said AEC planned to seek an injunction that would block final approval by state leaders. “Until the bid is approved, we maintain our fully valued call and target price of RM2.30 (based on sum of parts) for now,” HwangDBS Vickers Research said.
While maintaining a market perform call on the stock, another research house, RHB Research, said after taking into account the potential additional earnings from the racino and reducing net cash balance, its sum of parts-based (SOP) fair value for GenM would be raised to RM3 from RM2.90.
In its report yesterday, the research house said GenM’s proposal entailed a phased development process that would begin with the opening of a preliminary phase of the facility equipped with 1,600 video lottery terminals six months after approval.
It said GenM had committed to invest a capital expenditure (capex) of US$41 million within the first 10 years of operations for planned improvements and a minimum of 0.5% of gross gaming revenue for maintenance capital expense.
However, RHB Research said based on GenM’s outlay of US$380 million, it believed the internal rate of return (IRR) for the project was likely to be about 10% premised on “back-of-the envelope calculations”.
“Our assumptions are based on a net win per day of US$220-US$240 per day (which is the average for the other New York racinos) for the 4,525 video lottery terminals, and after taking into account the interest income foregone on the cash outlay, the repairs and maintenance expenses committed and taxes,” it said.
“In reality, given the phased development, we expect this to add only about 4%-5% to net profit in the first year of operations (presumably in FY11), before rising to 7%- 9% by FY12/13, assuming 4,525 machines and on a full-year basis),” it added.
GenM yesterday fell one sen to RM2.85 at the close, with 2.5 million shares transacted.
Written by Financial Daily
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