Genting Malaysia - Lawmakers in NY to allow seven casinos? BUY

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD

Research House: AMMB

Price Call: BUY

Target Price: 4.30

- According to news reports, lawmakers in New York agreed toamend the state constitution to allow up to seven casino operators lastweek. 

- Apart from Genting Malaysia Bhd (GenM), other well-financegroups vying for the licence include the Las Vegas operators and Indian tribalgroups, all of whom have hired their own lobbyists and consultants.  

- According to the same article, expectations are that theseven full casino licences would go to the highest bidders though the 'TimesUnion' report said that New Yorkers seem equally opposed and supportive basedon some recent polls.

- Details on the seven casinos for New York including thelocations will reportedly be determined only in 2013. But New York can legalisecasinos if two successive legislatures enact bills and voters approve thelegislation.

- We view this development positively as the legislativeprocess in New York seems to be in favour of liberalising the casino industry.It appears that compared to Miami, there is less negative newsflow on thesetting up of a full-fledged casino in New York. 

- We reckon that GenM would need a full-fledged casinolicence if it were to proceed with the US$4bil re-development of the JacobJavits Convention Center, which would also involve the construction of hotels,museums and residential properties. 

- GenM has said that it would be working closely with theEmpire State Development Corporation of New York to negotiate terms of theproject with a view of entering into a binding Memorandum of Understandingbefore or on 30 November 2012.   

- We believe that GenM with its net cash of RM967.1mil as atend-FY11 would not have problems bidding for the casino licence in NewYork. 

- However, we reckon that GenM would prefer to have anexclusive casino licence in New York instead of sharing the casino industrywith six other players (assuming the group wins the casino licence, ifany).   

- We maintain a BUY on GenM for its growing exposure  to the casino industry in US and Britain.Also, GenM's domestic casino operations are resilient, providing stable and recurringcashflows annually.

Source: AmeSecurities