Genting Singapore : Exiting Resorts World Jeju for Japan Buy

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Genting Singapore : Exiting Resorts World Jeju for Japan             Buy

Genting Singapore (GenS) has disposed its 50% interest in Resorts World Jeju to its joint venture partner, Landing International Development Ltd for US$420mil (S$588mil).  The proforma net book value of GenS' investment in Resorts World Jeju was S$519mil as at 30 September 2016. GenS is expected to recognise a gain of S$81mil on disposal of its 50% shareholding in Resorts World Jeju. In the SGX announcement, GenS said it is optimistic that the Integrated Resort Promotion Bill in Japan will be enacted in the near future. When this happens, GenS will need to devote significant resources to position itself as a strong candidate in the bidding process. Hence, it appears that GenS is exiting South Korea to focus on Japan. We are neutral on this development. Resorts World Jeju was supposed to open progressively in early-FY18F. GenS and its partner, Landing were supposed to apply for a casino licence for Resorts World Jeju in 1QFY18. 

According to various reports, the casino industry in Japan could be worth between US$20bil and US$40bil a year. Japan could be allowing two or three casinos in large cities such as Tokyo, Osaka and Yokohama. There could also be regional casinos in areas such as Hokkaido or Kyushu. We believe that the cost of developing and integrated resort cum casino in Japan could cost as much as US$10bil. GenS' gross cash stood at S$4.8bil as at end-September 2016. The group was in a net cash position of S$1,347.3mil (after subtracting the perpetual bonds). We understand that the Integrated Resort Promotion Bill is expected to be debated in the current Parliamentary Session in Japan. However, the date of the debate may vary. This was the reason the bill was not presented for debate last week.Maintain Buy on GenS for now. We are reviewing our fair value for GenS.

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