S Korea is no virgin ground for gaming and locals are not allowed into all the casinos there except one. Separately the target Chinese market is also slowing - I think combination of slowing GDP in China and increase supply of casinos around the region...
Genting ventures into South Korea
Published on Feb 08, 2014
HONG KONG - Casino operator Genting Singapore and Chinese property developer Landing International Development will develop a US$2.2 billion (S$2.8 billion) casino resort in South Korea, joining global gaming firms rapidly expanding across Asia to court wealthy Chinese punters.
The tie-up, announced in Hong Kong yesterday, marks Genting's first foray into South Korea, an increasingly popular destination for Chinese tourists, who flock there to gamble and shop, thanks in part to easier visa rules.
Genting Singapore's parent company, Genting, operates a sprawling gaming empire from the Bahamas to Singapore.
The project, to be called Resorts World Jeju, will be located on Jeju Island, which is already popular with wealthy Chinese tourists. The complex will also include luxury hotels, a mall and a theme park.
A mock-up of the complex showed roller coasters, hotels with whimsical, castle-like facades and replicas of monuments like the Taj Mahal.
South Korea forbids its citizens from gambling in casinos outside of Kangwon Land, an isolated resort located three hours by car from Seoul. The country has 16 foreigner-only casinos, whose primary customers come from China and Japan.
Many Asian countries, including the Philippines and Vietnam, are building large-scale casino resorts, hoping to attract Chinese punters and imitate the success of Macau, the world's casino capital, which rakes in seven times more annual gaming revenue than Las Vegas.
With its eyes firmly on the Chinese, one of South Korea's biggest gaming firms, Paradise, said last October that it was building a US$1.7 billion casino resort in Incheon with Japanese gaming firm Sega Sammy Holdings.
REUTERS
PLAY OF THE WEEK
China slowdown shows in casinos
Eyes on Genting after Macau, MBS revenues miss mark
Published on Feb 08, 2014
Although 50 per cent to 60 per cent of VIPs patronising the casino at Resorts World Sentosa come from China and Hong Kong, a trader said it would do better than MBS because of strong growth in its business among Asean clients. -- ST PHOTO: KEVIN LIM
By Goh Eng Yeow Senior Correspondent
CHINA market watchers set great store by data such as the manufacturing figures produced by global lender HSBC to determine the health of the Chinese economy.
But some traders use a simpler measure - the takings which the Macau gaming sector gets each month - to measure Chinese economic activity.
It is reasonable to assume that if the giant China economy is doing well, more well-heeled Chinese will make their way to Macau's glittering casinos.
Investors were already worried by the lacklustre purchasing managers' index compiled by HSBC showing the mighty mainland Chinese manufacturing sector had suffered a weak start to the year.
Then came word that growth in the Macau gross gaming revenue for January had missed consensus estimates.
And in a week when the Shanghai stock market was closed until yesterday for Chinese New Year festivities, Macau casino plays in Hong Kong got hammered when the news was released on Wednesday, though they later staged a strong rebound.
So did Genting Singapore, even though its weakness earlier this week was also attributed to a wider market sell-off as foreign investors turned jittery and sold everything in sight across the region, as they retreated to the relative safety of markets in the United States and Europe.
Now, opinion appears to be divided as to whether Genting Singapore is worth venturing into, after retreating as much as 4.34 per cent during the week.
Yesterday, it ended 4.5 cents higher at $1.39, following news that it had teamed up with Chinese developer Landing International Development to jointly develop a US$2.2 billion (S$2.8 billion) casino resort on South Korea's Jeju Island.
Credit Suisse had noted in a report that Macau gaming revenue had risen 7 per cent to 28.7 billion patacas (S$4.59 billion) last month, from the corresponding month last year. This was lower than market estimates of 11 per cent to 14 per cent.
But the lacklustre showing in Macau gaming revenue is largely due to an extended slowdown in the VIP business last month, it added, as the mass market business stays supported by growth in mainland visitor arrivals.
The same weaker trend had also showed up at Marina Bay Sand (MBS), rival of Genting's Resorts World Sentosa (RWS) casino, which reported that its fourth quarter operational earnings had fallen 31 per cent to US$259 million from the third quarter.
One trader said RWS may not be expected to produce as weak a set of results as MBS, given the strong growth in its VIP business among Asean clients. In contrast, MBS relies heavily on mainland Chinese.
"The trend in RWS' VIP strength began in the third quarter and could start to show in Genting's financial results on Feb 20. If its fourth quarter results could confirm RWS' lead in the VIP business, it will be a strong catalyst for the stock," he said.
While China is blamed for the lacklustre showing in Macau casinos and MBS, Deutsche Bank feels it may provide a silver lining for RWS as its macro economic outlook improves, since 50 per cent to 60 per cent of the RWS VIPs come from China and Hong Kong.
But keeping a neutral rating on the stock, Nomura said that with Singapore's maturing casino market, any upswing in Genting's earnings is only possible through a sharp jump in VIP volume or a deployment of its huge cash balance in overseas ventures.
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