Genting endures volatility amid selldown, licence issue

INVESTORS in Genting International had not only the market plunge to contend with but also news that the gaming operator's ability to obtain a casino licence is under question.

The Home Affairs Ministry said on Tuesday that the Genting-Star Cruises consortium's gaming licence was not an automatic right that goes with the building of the Sentosa resort.

The ministry has told Genting and Star Cruises that it will conduct 'suitability checks' before the licence is issued.

The ministry's statement comes as a signal to Genting that the Singapore Government will scrutinise its ties with Macau casino billionaire Stanley Ho, who is rumoured to have links to Macau triads.

Not surprisingly, the counter took a beating on Wednesday, tumbling by 6.5 cents, or around 8 per cent, to close at 75.5 cents, on 120.3 million shares traded.

Following the revelation of the ministry's statement, some gaming analysts in Malaysia, according to The Business Times, remained bullish, saying that Genting will get a casino licence in Singapore.

Genting also issued a statement on Wednesday saying it was 'fully committed' to making the resort a success and to meeting the 'suitability requirements' for a casino licence.

This cheered investors, who bought back into the stock, pushing it up by more than 2 per cent to 77.5 cents on Thursday.

Market watchers say it would be difficult to assess the 'true impact' the casino licence news had on Genting shares because the broader market was being sold down dramatically.

'At its low on Wednesday, the index fell by 192 points, so in essence, every stock, good or bad, was probably being cast away,' said a remisier.

He also noted that the malfunction in the trading system late in the day could also have affected Genting trades.

Last Friday, Genting announced a 48 per cent fall in its full-year net profit to $56.9 million, on the back of investment losses and higher interest expenses.

However, revenue shot up from $80.98 million to $292.9 million, thanks mainly to its British casino operations.

After the results, OCBC Investment Research issued a report saying the investment case for Genting is the 'potential penetration' into new markets.

'In that respect, we see it as a strong contender for the British super casino licence and have allowed for a 75 per cent probability of winning this in our valuation,' it said.

It added that for the Macau project, there is a possibility of Genting withdrawing, and so it has not allowed for this project in its valuation.

OCBC has downgraded the shares from a 'buy' to a 'hold' as it thinks the stock does not have much more room to rise.

'We will reassess its valuation when its potential to acquire other gaming licences (other than the British one) is made known,' OCBC said.

However, CIMB-GK appears to be more bullish, keeping an 'overweight' rating on the stock.

It said Genting's statement should ease concern over the casino project and help restore investor confidence.

Investors seem to agree. Thestock rose 5.5 cents to 83 cents yesterday and was the most active counter, with 142.2 million shares changing hands.

gabrielc@sph.com.sg