Malaysia Explores Possibility of Issuing 2nd Casino License for Forest City Project; Possible Negative Effects for Marina Bay Sands and Genting Group
Anwar Ibrahim, the Prime Minister of Malaysia, has reportedly met up with 2 of Malaysian’s top business leaders, including Lim Kok Thay, CEO of Genting Malaysia Bhd, to talk about the chance of issuing a 2nd casino license for the US$100bln suburban complex located in Johor, close to the border with Singapore.
Relatedly, Resorts World Sentosa and Marina Bay Sands, casinos located in Singapore, are said to be “net losers” from the aforementioned possible casino project in Johor. Also, even if it receives a 2nd casino license in Malaysia, the wider Genting Group may still be adversely affected, based on the information provided by Nomura, Japan’s biggest brokerage group and investment bank.
Meeting regarding a possible 2nd casino license:
Last week, the Prime Minister suggested the proposition to the founders of local conglomerate Berjaya Corp, Vincent Tan and Lim, at a meeting at the location of the Forest City project, as reported by Bloomberg.
Tan has long wanted his own casino license, but his former advances have suffered rebuff. In addition, Berjaya Corp manages brands like 7-Eleven and Starbucks across Malaysia, among others, and is included in real estate development.
Dotted with high-rise condominiums constructed on retrieved land, Forest City was visualized as an elite township focused on investors from China. However, it has had difficulty drawing notable interest due to the timing of the COVID-19 pandemic and Beijing’s crackdown on its residents investing abroad. All of this led to Forest City being described as a “ghost town” in many reports by the local media.
According to Bloomberg, the casino represents a means of revitalizing the mentioned city. It’s backed by Chinese-owned Country Garden Holding, the master developer of the project, according to Inside Asian Gaming.
There is also the possibility that Ibrahim Iskander, the king of Malaysia, could support this step as he owns a 20% share in the Forest City development. There was also the proposition that more members of the royal family would be invited to invest their money in any bigger casino project.
On a related note, since 1969, the Genting Group has possessed the only casino license in Malaysia that belongs to its Resorts World Genting and Genting Highlands resort, and because of that it may provide precious expertise to any fresh casino-linked project.
The prospect of a 2nd casino license is largely negative for Marina Bay Sands and Genting Group:
Although it is still hazy whether the prospect of a 2nd casino license will happen, Alpa Aggarwal and Tushar Mohata, analysts at Nomura Bank, wrote in a memo that the news is “broadly negative for Genting Group, which holds the existing Malaysian casino license and is majority shareholder of Singapore’s RWS.”
Commenting on the matter, they wrote, according to IAG: “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. 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.”
Although analysts thought Genting Malaysia, the operator behind Resorts World Genting, would be less affected because of its more localized clientele and its farther location from Forest City, the effect wouldn’t be exactly 0, even if Genting Bhd or Genting Malaysia would be the ones to gain the specified license.
In this regard, they added: “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.”
Furthermore, according to them, a negative effect may arise from the necessity to invest in constructing a fresh casino.
As for the probability of a 2nd casino license becoming a reality, Nomura recognized that it could be “politically difficult” because of the religious and collateral effects, even though the location of Forest City might make it more pleasant.
In this regard, the bank noted: “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.”