Saturday, July 31, 2010

Genting Malaysia Likely to Secure Aqueduct Project - BorneoPost Online - Borneo Daily News

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RETAINING OWNERSHIP: In essence, the state of New York will own the video lottery facility consisting of 4,500 video game machines (VGMs), parking facility, and improvements constructed or operated by vendors at Aqueduct.

Gaming sector expert Genting Malaysia Bhd (Genting Malaysia) was likely to secure the concession for the Aqueduct Racetrack (Aqueduct), being the sole leader left in the bid.

ECM Libra Capital Sdn Bhd (ECM Libra) in a research report yesterday stated that Genting Malaysia was likely to win this project as it would create 1,300 temporary jobs and 800 permanent jobs for the locals in New York. The locals expressed their approval during a well attended Community Board 10 meeting on July 16.

To recap, SL Green led consortium and Penn National Gaming were disqualified earlier this month for submitting non-complying bids that negotiated for terms more favourable to them, leaving Genting Malaysia as the sole surviving bidder.

The project, called a racino, would include more than 4,000 video slot machines plus a hotel and other facilities located at the racetrack for thoroughbred horses in the New York City borough of Queens.

Should the group successfully procure this project, the Aqueduct would contribute a tidy US$30 million per annum. The successful bidder would pay a US$300 million licencing fee to the New York Lottery.

Following that, US$250 million would be disbursed to the successful bidder as a construction capital grant. ECM Libra added that cost overruns would be borne by the successful bidder.

In essence, the state of New York would own the video lottery facility consisting of 4,500 video game machines (VGMs), parking facility and improvements constructed or operated by vendors at Aqueduct. It would also retain ownership of the Aqueduct land and all its property and improvements.

The successful bidder will advance US$2 million per month to the New York Racing Association (NYRA) from the securing of the concession to the opening of the Aqueduct scheduled for the first quarter of 2012 (1Q12). The NYRA would repay the advances via its seven per cent share of Aqueduct’s VGM revenues.

The Aqueduct would be the sole video gaming operator within New York City limits.

From the financial years ending March 2005 to March 2010 (FYE03/05 – FYE03/10), the VGM industry in New York experienced a 35 per cent compounded annual growth rate (CAGR) in revenues (net win) and 33 per cent CAGR in slot handle (credits played). This was primarily due to the opening of Empire City Casino (Empire City) at Yonkers Raceway in October 2006 at Yonkers, just outside New York City limits.

Remarkably, industry revenues grew by seven per cent on a yearly basis in FYE03/10 despite a recession due to the relatively affluence of New Yorkers and successful bus programmes.

Looking at the FYE03/10figures, Empire City recorded the highest average daily win per VGM at US$286 due to its proximity to New York City. Aqueduct, being located within New York City limits, should fare better.

It is also located in between New York City and John F Kennedy International Airport, the busiest airport in the United States which handled 45.9 million passengers back in 2009.

Pending the bid result, the research house employed a target price of RM2.78, maintaining its estimates for the moment.