A rundown of the region’s up-and-coming casino jurisdictions
If South Korea is a sleeping giant in the Asian casino sector, there are a number of other jurisdictions that also have strong potential. One of them, the Philippines, also has a casino industry that is three decades old. Having a legacy industry creates challenges as well as operational advantages. But in an Asia Pacific region with a huge pent up demand for casino gambling and only a limited supply of product, being an incumbent must count as a huge advantage.
Here, Inside Asian Gaming gives a brief guide to some of the haves, have-nots and maybe soon to haves, of regional casino gambling.
All Shook Up
The Philippines has a chance to create a world class gaming industry—with the right reforms
The Philippines casino market was first regulated 33 years ago and now consists of more than 30 gaming properties across the country. In addition, the majority of Asia’s online gaming companies are domiciled in the Philippines, which was the first regional jurisdiction to license online operators.
Unlike South Korea, the Philippines government allows its citizens open access to all land-based gaming properties and also actively solicits international investment in the land-based and online industries.
That appeal to international investment for the land-based sector has had mixed results so far. One success story is Resorts World Manila next door to Manila International Airport, a US$700 million joint venture between Genting Hong Kong and Alliance Global Group, a Philippines conglomerate. The project, which had its first phase opening in August 2009, is comparable with Macau properties for the quality of its gaming floor, its hotels and other facilities. The Philippines is only a two-hour flight away from key markets such as China and a four-hour flight from South Korea and Japan. But the country’s gaming market is not yet universally regarded either by industry analysts or by all would-be investors as being a safe bet in the medium to long term.
Plus and minus
The Philippines’ market advantages—including a friendly service culture and widespread use of an international language, English—have to be set against some significant disadvantages. The country’s gaming regulator, the Philippine Amusement and Gaming Corporation (Pagcor), has a patchy reputation domestically and internationally for the quality of its management. There are also concerns that Pagcor, as an operator of 13 casinos in its own right, has not always been an honest broker in its dealings with privately-owned casinos it perceives to be market rivals to its own establishments. Aruze, a Japanese gaming equipment manufacturer, put US$100 million into an escrow account nearly two years ago effectively as a down payment on a casino resort at Manila Bay. That project was stalled over Aruze’s insistence that it be granted title to the land—a special dispensation from the country’s normal rules on foreign investment. Aruze fretted that without such title, it could lose its infrastructure investment at any time. Just before the country’s presidential elections in May, the then Chairman of Pagcor, Dr Efraim Genuino, managed to secure a so-called ‘midnight deal’ on the land title issue in Aruze’s favour. The new government of incoming President Benigno Aquino, after some deliberation, appears to have agreed to honour this deal. That could encourage other foreign investors to come forward and seek similar terms.
The election in May of a new government pushing for reform of the public sector appears to be a real opportunity for the Philippines to turn a new page in its regulation of the casino industry and to form new partnerships with foreign investors. There are, however, some signs of ambivalence toward the industry by some members of the new administration. There have been a number of initiatives that look like political grandstanding. One was the announcement two months after the election of a moratorium on expansion of landbased casino gaming. It’s unlikely, though, that in the medium to long term this will be a major problem for the industry.
Push and pull
All governments are essentially coalitions of people with a considerable range of opinions. There is some evidence that the Philippines government is currently being pulled in two conflicting directions regarding the casino sector. The more left-leaning wing of the administration appears not to like gambling at all, and would probably be quite happy to see it banned altogether. The President and his immediate advisers seem to take a more pragmatic view. They are willing to keep it going for a number of reasons. First, it doesn’t look good to foreign investors if the government were suddenly and unilaterally to strip existing foreign owners such as Genting Hong Kong of their property rights. Second, gaming provides a useful form of tax income for community causes. President Aquino showed the importance he gives to the Pagcor issue by appointing Cristino Naguiat, one of his long-standing friends and allies, as Pagcor chairman to replace ex-president Gloria Arroyo’s appointee, Dr Genuino.
Members of Pagcor’s new team management team recently visited Macau to learn more about regulatory and management practices in the world’s biggest casino market by gross revenue. Macau is itself still a work in progress in regulatory terms, however, with no slot machine regulations yet published even though it is eight years since market liberalisation.
While the top people in the Philippines administration seem to be broadly supportive of the casino sector, they do appear to want reform. IAG understands a wide range of options have been discussed, including spinning off Pagcor’s regulatory function into a separate body with no direct commercial interest in the industry. A less radical but possibly more politically acceptable solution domestically would be to keep Pagcor’s dual role but introduce more market discipline to the organisation by privatising or part privatising it.
Full privatisation of Pagcor was suggested recently by Ramon Ang, President of San Miguel Corporation, a Philippines conglomerate. He offered to buy the organisation from the government for US$10 billion, suggesting to a Philippines newspaper that Malaysian billionaire Robert Kuok was likely to be involved. Mr Kuok later denied that. In a separate development, a Hong Kong conglomerate reportedly expressed interest in buying Pagcor.
Even assuming a conglomerate or an individual has significant funds for a buy out, valuing Pagcor has proved difficult. In 2007, Pagcor’s original charter (due to expire in July 2008) was renewed for another 25 years. Pagcor had a declared income from gaming taxes and operator licensing fees of P29.78 billion (US$640 million) last year. Given that its concession is due to last at least another 22 years, the valuation of US$10 billion suggested by Mr Ang looks on the low side.
An alternative proposal—to part-privatise Pagcor—was recently put to its senior management, according to a person familiar with the process that IAG has spoken to. The idea is to introduce more market discipline to Pagcor, while still providing a revenue stream for the government in the form of tax levied on gaming and from licensing fees. Under the proposal, up to 49% of Pagcor would be floated on the Manila stock exchange.
There is a precedent in Asia for doing something similar. As we report in our story ‘Wakey Wakey’ in this edition, Grand Korea Leisure, a state-owned casino operator in South Korea under the Seven Luck brand, floated 30% of its stock on the Seoul bourse last November as part of a drive to make the enterprise more commercially minded. A similar approach applied to Pagcor could go a considerable way to providing reassurance for foreign investors that their money will be safe.
Is Ho Tram finally on track?
Vietnam is another Asian gaming jurisdiction that already has casinos. But none of the five existing properties are open to Vietnam’s 85.8 million nationals.
That’s a pity from the industry’s point of view to put it mildly, given that Vietnam’s GDP grew by 6.4% in the second quarter of 2010, according to Vietnam’s General Statistics Office.
Probably the most famous casino in Vietnam is one that hasn’t yet been built. The Ho Tram project was conceived as a US$4.2 billion bells and whistles resort in the heady days before the global financial crash of late 2008. At that time, it seemed any casino licence granted anywhere in Asia was a licence to print money.
Even during that bull run, however, a number of analysts questioned the viability of such a large capital investment in a market without input from local players. The consortium behind the project—Asian Coast Development Ltd (ACDL)—remained resolutely upbeat. Its success in bringing in MGM MIRAGE (now MGM Resorts International) as the brand partner for the resort was taken by some as a sign of the impending opening of the Vietnam market to local players, which in turn would drive further investment confidence. It hasn’t happened so far. Then came the global financial crash, and even an established Asian operator such as Las Vegas Sands Corp in Macau found it difficult to raise project debt for its Cotai 5 and 6 project.
A lot has reportedly been going on behind the scenes to organize funding for Ho Tram. But the only notable developments seen by outsiders in the last two years have been the clearing of vegetation in preparation for construction, the replacement in April this year of Mike Aymong as Chairman of ACDL, with former MGM MIRAGE President of Global Gaming Lloyd Nathan brought in as CEO, and the announcement that the project would be divided into six phases, consisting of five distinct resorts¬—two with casinos.
The financial engine room for the scheme will be the first of these two casinos. The 50-year licence granted by the Vietnamese government allows for a resort-wide total of up to 180 gaming tables and 2,000 electronic games.
Earlier this year, sources told IAG that Vietnamese banks were willing to underwrite up to US$250 million on the first phase funding, provided a similar contribution was made by ACDL. In September, there were suggestions that ACDL had come up with US$150 million, taking the first phase total funding to US$400 million, and that construction would start early in 2011.
Those rumours appeared to be confirmed in late October when the English-language media in Vietnam ran a story saying local government officials had visited the site with representatives of Ho Tram Project Company Limited, and that construction work had restarted on 12th October.
The report stated: “Accordingly, from October 12, Ho Tram Strip project—Phase 1 had officially restarted including items: one 19-storey five-star hotel (including 541 rooms), restaurant area, low-voltage station areas, wastewater treatment area, golf club.”
It continues: “The investment capital of Phase 1 is US$165 million as estimated; It is expected to complete and put into business in October 2012. Then, the investor will implement the next phases.
“Ho Tram Strip is the integrated resort project with total registered investment capital of US$4.2 billion, meets five-star standard on the total area of 162ha [hectares], located in Phuoc Thuan commune (Xuyen Moc district). The project is divided into six phases, will be expected to complete the entire [sic] by 2020.”
Mr Nathan mentioned earlier this year that New York-based hedge fund Harbinger Capital Partners was among a group of investors backing the project. But the Vietnam media report saying Ho Tram technically remains a US$4.2 billion project seems ambitious, given the effort it took Sands China to secure US$1.75 billion debt toward the US$4.2 billion cost of Cotai 5 and 6 in the red hot Macau market.
Holiday in Cambodia?
NagaWorld is doing well, but times are tougher for the border casinos
At last count, 27 casinos were licensed to operate in Cambodia. But tax revenue from the gaming sector declined US$17.5 million from 2008 to 2009, representing a 7% or 8% drop overall, according to the country’s Ministry of Economy and Finance.
That was probably a result of the closure of the slot clubs in the capital Phnom Penh in February 2009, rather than the global economic downturn of late 2008. The Cambodian government doesn’t charge specific taxes on gross casino revenues. Would-be operators must pay for a gaming permit issued by the Ministry of Economy and Finance, then pay a flat fee monthly levy on their business. As long as they stay in business, the government should get a constant income.
But the willingness of the government to issue new casino licences outside of the capital (NagaWorld has a monopoly within a 200-kilometer radius of the principal city) means too many casinos may be chasing too little business, especially given that Cambodians are not allowed to use any of them.
NagaWorld is the Cambodian casino that everyone in the industry has heard of, even if they haven’t visited. By Cambodian standards it’s huge. It has around 1,000 gaming machines and 176 tables. In late August, Entertainment Gaming Asia Inc., formerly known as Elixir Gaming Technologies, Inc, announced it had reached 670 gaming
machine seats in operation at NagaWorld. That was a more than two hundred percent increase from the number of gaming machine seats the company had at the resort in January 2009.
NagaWorld also boasts the biggest conference hall in the country, as well as a hotel complex. Nonetheless, even NagaWorld’s resort status couldn’t protect it entirely from the effects of regional recession. It was hit harder and faster than the Macau casinos. In the first half of 2009, VIP revenues at NagaWorld fell 66.8% to US$34.1 million, from US$102.8 million in the equivalent period in 2008.
Results for the first half of 2010 published in August showed a sharp improvement. NagaCorp’s net profit for the period totaled US$21.1 million, up 83% from the US$11.5 million recorded for the first half of 2009.
Chasing the mass
The mass-market segment, comprising the main floor and the gaming machine zones, generated 70.2% of NagaWorld’s US$67.1 million total gross revenue—a sharp contrast to its 46.4% contribution last year. Junket revenue, meanwhile, fell to 29.8% of gross revenue from 53.6% for the first half of 2009. It brought in US$20.2 million this year, compared to US$34.1 million in 2009.
That may have contributed to the decision of NagaWorld management in late August to refocus its strategy away from mid level high rollers (typically with check in levels of US$25,000), and instead focus on mass-market players.
As Cambodia’s economy booms and foreign trade and exports increase, the resort’s operator, Hong Kong-listed NagaCorp, will be well positioned to drive further mass market business via conferences and exhibitions—in the manner of The Venetian Macao.
The story for Cambodia’s 26 border casinos, serving players mainly from Vietnam and Thailand, is not so rosy, even though currently more are planned. Entertainment Gaming Asia announced at the end of May that it had been granted a casino licence by the Cambodian government for a project, dubbed Dreamworld Casino and Resort, in Takeo Province, near the Vietnam border. Dreamworld is slated to include a and hotel on more than seven acres (30,000 square meters) of land.
Cambodia’s border casinos have sprung up within the last ten years—many of them in a sudden growth spurt in the last five years, riding on the back of a general upswing in optimism about rising gaming industry revenues in Asia. Bavet, on the border with Vietnam, has 14 casinos, plus at least two more projects apparently under construction. In theory, Bavet has a favourable location for border casino business. It is not much more than an hour by road from Ho Chi Minh City in Vietnam, that country’s biggest urban centre with a population of 7.1 million at the 2009 census. Many of those people are passionate gamblers who aren’t allowed to visit Vietnam’s casinos unless they have access to a foreign passport. In reality, though, an hour’s commute to Bavet can stretch into a much longer journey due to Vietnamese red tape that can vary in length from week to week and even day to day.
In late September, the Phnom Penh Post reported that Winn Casino in Bavet had closed due to bankruptcy, leaving 300 locals jobless. More could follow in Bavet and elsewhere unless either cross-border trade improves, or the authorities put a cap on the number of licences they are willing to issue.
Thunderbird is Go
India gets a new casino resort and more could be on the way
There’s a widely held belief that Indians are not nearly as interested in casino gambling as the Chinese. The opening in October of Amsterdam-listed Thunderbird Resorts’ new casino resort property in the former Portuguese colony of Daman may be a sign that things are changing.
Thunderbird says it is specifically targeting locals as customers, rather than foreign tourists. Between now and January, the Daman property on India’s west coast will fully open its 7,600 square-meter casino with up to 400 slot machines and 25 table games onto what is essentially a brand new market. The resort also has a 176-room hotel.
The company said in a filing last year it had raised an initial US$58.5 million for the project through a mixture of debt and equity. The 1976 Gambling Act of Goa, Daman & Diu prevents Thunderbird (as a non-Indian national entity) from owning or operating a casino in India. The casino operations in India are instead held by a group of Indian nationals who lease space from a joint venture company set up for the purpose called Daman Hospitality Private Limited.
The only other places in India with casino gaming are Goa and the former kingdom of Sikkim. Goa has a very limited operation, consisting of a small number of slot machines for use by foreigners-only in some luxury hotels, and a handful of casino boats. Political squabbling over the future of Goa’s gaming industry has resulted recently in what the operators say amounts to near harassment by the authorities, forcing them to moor further and further down river. Sikkim opened a land-based casino in March 2009, but only foreigners are allowed in.
Thunderbird could shortly be joined by another casino property in Daman. Mumbai-based Delta Corp, which started life as a textile business and expanded into real estate and gaming, says it has an agreement in principle with the Daman & Diu government for a land-based gaming licence. Delta Corp already owns and operates two riverboat casinos in Goa, and said recently it was in talks with Advani Hotels & Resorts to acquire a controlling stake in the company operating a third casino boat out of Goa, the M.V. Caravela.
Taiwan’s casino plan is still under debate
Has Taiwan missed the boat regarding its ambitions to create its own (albeit arms-length and offshore) casino industry?
The answer is probably ‘not quite’. But the resort or resorts eventually constructed in Taiwan could be a lot smaller and less of a draw for international visitors than the slick integrated operations created in Macau and Singapore. Does that matter? The key to success will surely be the rate of return on investment. So even if a Taiwan casino has a modest capex compared to the billions spent in Macau, it could still prove a success for investors if it can pull in enough customers.
There, some political uncertainties come into play both domestically within Taiwan and in terms of Taiwan’s relations with the mainland. Currently the frontrunner to play home to Taiwan’s first casino resort is the county of Kinmen, an offshore archipelago. It is nearer to mainland China than to Taiwan, and as a consequence, is bristling with concrete bunkers and other old military installations hinting at the historical tensions between the two neighbours.
If Kinmen approves the casino plan (and that is not yet guaranteed), then the Taiwan government would be very happy for most of the customers to come from neighbouring Xiamen in the People’s Republic. But that will depend on the political goodwill of China, and that is not guaranteed either. Even if built, a casino or two in Kinmen could become hostage to politics if the still delicate relationship between Beijing and Taipei were to suffer a setback. If the players are not to come from mainland China, then the bulk of them will be coming from Taiwan itself. That raises potential political difficulties. Governments (and its seems public opinion) in Asia are willing to support casino gaming, but seem to prefer foreigners to be the ones losing the money. That’s been proven recently in the public disquiet voiced in Singapore after a number of local players sustained heavy losses.
The Singapore press recently reported that Taiwanese pop star Jay Chou lost S$2 million at the Marina Bay Sands (MBS) casino in July. Mr Chou, who was in Singapore to perform three sold-out concerts at the Singapore Indoor Stadium, claimed the amount he lost was much smaller. Whether Taiwan’s pro-casino lobby could turn such reports to its favour is a moot point. Suggesting it would be better to keep the casino losses incurred by Taiwanese at home, tax them, and use the proceeds to fund worthwhile causes, would be one potential strategy.
The Taiwan law that allows pro-casino lobbyists even to dream of a local industry was voted through with a good deal of controversy by the country’s parliament in January 2009. It lifted a decades-old ban on casinos. The Penghu islands in the Taiwan Strait to the west of the main island were initially viewed as the front-runner in the race to host Taiwan’s first casino. On 26th September 2009, around 30,000 Penghu residents cast votes in a referendum on a proposal to develop two casino resorts there, and 56% of them voted ‘no.’ Penghu casino advocates claim a major reason for the ‘no’ vote was the central government’s failure to come up with detailed measures to counteract local concerns about the potential social ills created by the casinos. At least three years must pass before Penghu can hold another casino referendum.
Kinmen submitted a rival bid with an application in August 2009 for a referendum on casinos. Approval of the referendum appears to have been held back, and in the meantime, the pro-casino lobby, learning from the lessons of the Penghu failure, have been working on an improved pitch to get locals on side.
As we reported in our story ‘Lessons from the Lion City?’ in October, even in the absence of legal casinos, Taiwanese are avid gamblers. They get their fix at electronic gaming arcades to which the authorities turn a blind eye, or at least a pretty myopic one.
Taiwan currently has around 3,000 electronic game arcades offering quasi-gaming, in a similar fashion to Japan’s pachinko industry. Taiwan’s Electronic Game Arcade Business Regulation Act provides for two categories of arcade: i) Generate rate, which provide entertainment-focused games to the public, including minors, and ii) Restricted rate, which are off limits to people under eighteen years of age, where quasi-gaming is understood to take place.
Despite their less-than-ideal operating environment, Taiwan’s restricted rate arcades are estimated to generate over US$5 billion annually. That suggests plenty of pent-up local demand for legal gaming to support an ambitious casino venture, even if, as many fear, mainland China blocks its citizens from playing at Taiwan’s proposed casinos.
Land of Rising Expectations
Reports of casino liberalisation in Japan have been somewhat exaggerated
There appears to be a disconnect between Westerners’ expectations for liberalisation of casino gaming in Japan, and what’s actually happening in the country’s politics.
People can hardly be blamed for trying to wish casinos into existence in Japan. If and when they arrive, there could be a very big pay day for investors. Japan is the world’s biggest gambling market on a per capita basis, according to Felix Ling, chief consultant of Platform Asia Management Services. Mr Ling was one of a number of consultants that provided advice to the Singapore government in the run up to casino liberalisation in that market.
Pachinko is played by about one-sixth of Japan’s 124 million population. Those enthusiasts annually spend north of 21 trillion yen (US$6.6 billion) on the pinball-like machines. But legalization of casino gaming has been reported as ‘imminent’ in Japan since at least 2002, and nothing has happened so far.
In 2003, Shintaro Ishihara, Governor of Tokyo Prefecture, proposed a radical plan that avoided the need for new legislation and would have allowed casinos run in administrative terms in the same grey area as pachinko halls. Prizes won in Governor Ishihara’s planned casinos would have been exchanged for cash. But he couldn’t get the idea past the National Police Agency and the Justice Ministry. Since then, it has been generally accepted that any attempt to build a casino in Japan must be preceded by legislative reform.
Part of the reason for the gap between the expectation of casino reform in Japan and the reality could be that the Japanese people who tend to talk to foreign investors and journalists about the issue are pro-casino. While they are no doubt speaking sincerely and in good faith, they are giving a partial view. Nor does it do any harm for Western casino operators to talk up the prospects of casinos in Japan, especially if it helps to support their share prices.
Dr Toru Mihara, a visiting professor at Osaka University of Commerce, gets plenty of space in Western publications regarding Japanese casino legislation. He has also worked as an Advisor, Casino Study Group, to the Liberal Democratic Party of Japan. In 2008, he told the G2E Asia Conference in Macau: “I still believe we will see some initiative within two weeks, before the end of the current Diet [parliament] session.”
“We are not now discussing whether or not to build casinos, but we have moved on to discussing the structure of the regulatory authorities,” he added.
Jumping the gun
It appears he was premature in his assessment. In September this year, Dr Mihara, now a member of an advisory board called the Bipartisan Legal Movement for the Promotion of International Tourism, told the London-based Financial Times it would take six months of discussions for a formal casino bill to be introduced to the Diet in 2011.
“If Congress [sic] approves the bill, things will start moving very quickly,” suggested Dr Mihara.
He said two ‘integrated tourism zones’ were under discussion for licensing by the government, with Tokyo, Yokohama, Hokkaido and Okinawa among the locations being considered.
Even if national politicians do have the will to generate economic growth via casinos, the revolving door of Japanese politics hardly makes life easy for them.
Lack of will?
In December 2009, Kazuo Okada, a Japanese businessmen who made his fortune from supplying equipment to the pachinko industry, gave Bloomberg a stark assessment of the political situation. Mr Okada’s words carry special weight, given that as the head of Aruze, the slot and electronic gaming machine maker, and as a major shareholder of Wynn Resorts, he has as much to gain as anyone from liberalisation.
“In Japan, politicians are very weak in showing the will to do something,” said Mr Okada. “Casinos should be opened, against the backdrop of employment and tax revenue problems,” he added.
Mr Okada’s point about taxes is a pressing one. Between April and October 2009, tax revenue in Japan fell 22% according to Bloomberg. Some analysts suggest that was principally a product of the economy slowing down, but there are other factors at work. According to the Ministry of Internal Affairs and Communications, at the time of the population census of 2005, 20.1% of the country’s 127.8 million people were aged 65 or over. And by the time this year’s census is collated, it’s expected that the greying of Japan (and thus the reduction in the tax base) will have accelerated, in likelihood exacerbated by the country’s political opposition to mass immigration by foreign workers to cover the demographic gap.
Since Mr Okada made his observation in late 2009, the country has had two different prime ministers. From the time the pro-economic reform and pro-casino prime minister Junichiro Koizumi stepped down from his third term in September 2006, Japan has seen four prime ministers come and go. How can governments lasting on average only one year possibly find the time and political will to put a casino law at the top of their legislative agenda, when they barely have a grip on the reins of power? It’s a question the casino industry will no doubt be asking next time someone heralds the ‘imminent’ arrival of Japanese casinos.
Fears that Malaysia’s only casino would have its business gobbled up by Singapore may have been overplayed
Malaysia is home to one of the oldest casinos in Asia, yet in the medium to long term, the future of casino gaming within the country is unclear.
The majority Muslim population are barred from entering the gaming areas at Resorts World Genting (RWG), formerly known as Genting Highlands Resort. And while Malaysia is a moderate Muslim country, the fact that Genting’s casino licence has been renewed only on a six month rolling basis since its inception in the late 1960s may say something about the official ambivalence that exists toward the gaming industry generally.
Some good news is that the four-decades-plus experience of the parent company Genting Berhad in running and marketing gaming operations to non-Muslim Malaysians and foreigners visiting Genting Highlands has paid dividends in its new Singapore operation. There, Genting owns and operates—via its local unit Genting Singapore—Resorts World Sentosa (RWS), the first ever legal casino to open in the Lion City.
Good news is no news
There’s even better news. There had been fears that RWG—run by a specialist local unit Genting Malaysia (GM)—would lose large amounts of business to its swankier, newer cousin RWS and to Marina Bay Sands (MBS), run by Las Vegas Sands Corp. The worries may have been overplayed.
In February, on the eve of RWS’s opening in Singapore, investment bank Merrill Lynch said in a research paper it was concerned RWG might be cannibalised to the tune of US$202 million, or approximately 20% of its forecast US$1.1 billion gaming revenue for 2010.
But in September, CIMB Research, part of Malaysian investment bank CIMB Group, said in a research paper: “We along with the market, had expected cannibalisation to take two forms in 2Q  i) MBS’s debut in Apr 10 to eat into RWS’s share and ii) Singapore’s two IRs [integrated resorts] to cannibalise GM’s gaming pie. Instead GM held its own.”
CIMB said that while Genting Malaysia’s core net profit for the second quarter of 2010 had fallen 11% quarter on quarter, when judged on a year on year basis it had actually risen 8% to RM339.7 million (US$110.1 million), from RM314.7 million in 2009.
Given, however, that Genting Malaysia is unlikely to be given permission to expand its casino operations within Malaysia, it is looking outside the country for fresh growth. In the second half of the year Genting Malaysia caused controversy among some of its shareholders by purchasing Genting Singapore’s portfolio of 44 United Kingdom casinos for S$527.1 million (US$409.4 million). Some investors considered it a sweetheart deal hurried through by Genting Group to take the UK casinos off Genting Singapore’s balance sheet, and couldn’t see the value for GM. So agitated were they, that 38% of them voted against the move. It was a rare display of public dissent in terms of Malaysian corporate culture.
In late October, though, a bigger picture strategy emerged. Genting Malaysia announced plans to develop a large casino and entertainment complex at one of the sites for the 2012 London Olympic Games. If approved by Newham Council in east London, then building work on the project, in partnership with UK company Apollo Resorts & Leisure, would start immediately after the Games in the third quarter of 2012, with a planned opening in 2013. Both Genting and Apollo will hold a 50% equity interest in the joint venture with each party initially contributing £2.95 million to the scheme.
Apollo will apply for the gaming licence. Once approved, Genting Malaysia will buy the licence from Apollo for £5 million (US$8 million) and transfer it to Genting Casinos UK Ltd., a unit of Genting Malaysia.