Saturday, July 17, 2010

Genting’s ‘Racino’ Proposal Faces Uncertainty by Yvonnne Tan - The

Read original...

The delay in the proposed development and operation of a video lottery facility at New York City’s Aqueduct Racetrack does not bode well for Genting Malaysia Bhd which is now the sole surviving contender for the project, according to analysts.

“For now we are assuming that it’s a no-go,” an analyst who tracks developments in the company said.

He said the legal processes which were causing the delay could take a long time to get sorted out.

In an update on Genting Malaysia yesterday, Hwang DBS said the halt in the bidding for the rights to develop and operate the facility “could negatively affect” its bid, the outcome of which was initially scheduled for Aug 3.

“No one really knows what to expect now. To be fair, no one ever said that it was going to be easy from day one,” he added.

The successful firm which gets the approval for the project will, among other things, develop a designated and dedicated area to house and operate a slot machine-style “racino” (a combination of racetrack and casino) with 4,500 video-lottery terminals, and food and retail outlets.

It is believed that Genting Malaysia’s key management people are currently in the US to address any outstanding issues pertaining to the proposed development.

Genting Malaysia parent Genting Bhd’s head of strategic investments and corporate affairs, Datuk Justin Leong, did not respond to StarBizWeek’s queries yesterday.

To recap, on June 30 Genting Malaysia’s subsidiary, Genting New York LLC, together with two other US-based parties confirmed that they had submitted a bid for the project.

This narrowed the bidders’ list to three groups from six as earlier reported.
The other two US groups have since been disqualified for not fulfilling certain requirements.

A US State Supreme Court earlier this week halted any further developments to the proposed racino so that it could consider whether a previous winner of the same project – Aqueduct Entertainment Corp (formerly Aqueduct Entertainment Group) – had been wrongly rejected. A hearing is expected to take place next Friday.

Kenanga Research head Yeonzon Yeow said in view of the legal complications, Genting Malaysia “may be able to look at other more lucrative opportunities.”

Some earlier analyst reports on Genting Malaysia’s possible venture noted that net profit margins for such projects could be as low as 5%.

This was because racinos had to use large chunks of their net wins to make stipulated legislative welfare contributions as part of the requirements attached to the licence, they said.

At the close yesterday, shares of Genting Malaysia were up 0.75% at RM2.70.