Singapore casinos Marina Bay Sands and Resorts World Sentosa stand to be “net losers” from a potential casino development in the southern Malaysian city of Johor, while the broader Genting Group may still face negative impact even if is the recipient of a second Malaysian casino license, according to Nomura.
The prospect of a second casino in Malaysia was revealed by business media outlet Bloomberg on Thursday, with Malaysian Prime Minister Anwar Ibrahim said to have met with Genting Group’s Lim Kok Thay and Berjaya Corp founder Vincent Tan to discuss the possibility of using a casino to revive the fortunes of the embattled US$100 billion Forest City residential development in Johor, near the Singapore border.
While it remains unclear how likely such a scenario is to become reality, Nomura analysts Tushar Mohata and Alpa Aggarwal said in a note that the news was “broadly negative for Genting Group, which holds the existing Malaysian casino license and is majority shareholder of Singapore’s RWS.
“We think the Singapore casinos, under Genting Singapore and Marina Bay Sands, will be net losers should Malaysia eventually allow a second land-based casino in Forest City due to their geographical proximity,” they wrote.
“If Berjaya is awarded the license, we think Genting Singapore’s parent company Genting Bhd will be negatively impacted, too, as it consolidates Genting Singapore’s revenues and earnings.”
While the analysts suggested RWG operator Genting Malaysia would be less impacted due to its farther distance from Forest City and more localized customer base, the impact would not be zero – even if either Genting Malaysia or Genting Bhd was awarded the casino license itself.
“In a scenario that Malaysia allow a Forest City casino and award the license to Genting, while Genting Singapore will be still negatively impacted, the net impact on Genting Malaysia and Genting Bhd will depend on which entity builds the casino, but the eventual impact on the group holdco Genting Bhd should be less negative, in our view.”
Negative impact would come from the need to invest in building the new casino, the analysts added.
As to the likelihood of a second casino license materializing, Nomura acknowledged such a scenario as “politically difficult” given religious and other influences although Forest City’s location might make it more palatable.
“If the government proceeds with the idea, given Forest City’s status as a Special Financial Zone, it also remains to be seen if the gaming tax structure here will be lower than in Peninsular Malaysia, which can make returns on any new casino development more attractive,” the bank wrote.
UPDATE: Genting Malaysia and Berjaya deny supposed Forest City discussions
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