Genting Malaysia Bhd’s (GenM) wholly owned subsidiary, Genting New York LLC (Genting NY) has cleared the final hurdle to develop and operate a video lottery facility at the Aqueduct Racetrack in New York following the green light given by the New York State Comptroller.
In a filing to Bursa Malaysia yesterday, GenM said the Office of the New York State Comptroller had on Monday announced its approval for Genting NY to be selected as the developer and operator of the video lottery facility.
“This represents the final approval required,” said GenM, a leading leisure and hospitality company.
The company said that upon receiving the memorandum of understanding from the state of New York, Genting NY would pay the upfront licensing fee of US$380 million (RM1.18 billion) to the state within 10 business days.
GenM noted the licence was for 30 years and that the construction of the project, to be known as Resorts World New York, would commence “as soon as practicable” with the opening of the preliminary phase expected by spring 2011.
Separately, State Comptroller Thomas P DiNapoli announced that he had approved with immediate effect the contract with Genting NY for the video lottery facility.
“After nearly a decade of false starts and broken promise the VLT (video lottery terminal) contract is done,” DiNapoli said in a media statement dated Sept 13.
Describing the contract as one of the most important vendor contracts New York has ever signed, he said the VLT contract involved hundreds of millions of dollars and that its 30-year licence would carry the future of New York’s racing industry on its back.
“My office did this right and we did it expeditiously without sacrificing thoroughness. We took every step to ensure the taxpayers are safeguarded in this contract. It’s New Yorkers’ money; it’s my job to protect it,” DiNapoli pointed out. The contract will be returned to the state lottery division with the comptroller’s approval.
Earlier, GenM said the New York State Lottery announced on Aug 3 that its evaluation committee had unanimously recommended to the New York governor that Genting NY be awarded the racino project after three previous failed rounds of bidding dating back a decade.
However, the recommendation was subject to approval by the New York governor, the temporary president of the New York State Senate and the speaker of the New York State Assembly. These approvals were announced on Aug 17.
Genting had offered a whopping US$380 million upfront payment to the state which is US$80 million higher than what was offered in previous rounds.
Resorts World New York would house 4,500 electronic slot machines or VLTs. It would also 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, a 450-seat two-storey festive casual dining promenade and parking facilities for 7,000 vehicles.
In its second quarter ended June 30, 2010 (2Q10), GenM’s net profit declined 7.5% to RM305.69 million from RM330.48 million a year ago on the back of a revenue that rose marginally to RM1.226 billion from RM1.202 billion.
The company posted earnings per share of 5.36 sen in 2Q10 against 5.78 sen previously. Its net assets per share stood at RM1.77 as at June 30.
GenM’s minority shareholders had recently approved the company’s proposed acquisition of the UK casino business from its sister company Genting Singapore Plc. The deal is set to cost GenM £340 million (RM1.6 billion) for the assets that include 44 gaming licences in the UK and various properties.
The acquisition is in line with GenM’s strategy to grow its core business of leisure, hospitality and entertainment internationally. Genting UK comes with established gaming brands such as Crockfords, Colony Club, Maxims, Circus, The Palm Beach and Mint.
With news of the final approval of the racino project surfacing, GenM’s share price added six sen to close at RM3.16 yesterday, after trading to a 52 week high of RM3.19. It recorded a 52 week low of RM2.46 on July 2, 2010. Yesterday’s volume reached 16.96 million shares.
Year to-date, the stock has gained 12.46% and is trading at an estimated price-earnings ratio of 14.43 times, according to consensus forecasts. Of the 27 research houses tracking the stock, there were 10 buy, eight hold and nine sell calls.
Written by Yong Min Wei
This article appeared in The Edge Financial Daily, September 15, 2010.
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