By Star Online: Business
10 July 2012
PETALING JAYA: There is much uncertainty as to how the Singapore government's proposed changes to its casino law will impact Genting Bhd and its 52%-owned unit Genting Singapore, whose Resorts World Sentosa is one of only two casino resorts in the island-republic.
Analysts who spoke to StarBiz said the situation was fluid as the proposals, which aim to impose harsher penalties and restrictions on gaming operators and their patrons, were at the public feedback stage and only scheduled to be tabled in Singapore's parliament at the end of the year.
The news of the amendments sent Genting shares nine sen, or 1%, lower to RM9.76, erasing some RM334.71mil off its market capitalisation.
Genting Singapore, meanwhile, shed S$0.02 to S$1.41.
In its financial year ended Dec 31, 2011, Genting derived RM7.79bil, or 39.9%, of its revenue from its Singapore subsidiary, putting the latter neck and neck with Genting's Malaysian operations which brought in RM7.77bil, or 39.7%, to the group.
Its 49.4%-owned associate Genting Malaysia Bhd was previously the top earnings generator.
Last Friday, the Singapore government, via the Casino Regulatory Authority (CRA) as well as its trade, home affairs, finance, and community development ministries, announced a slew of improvements to the six-year-old Casino Control Act.
It is now seeking feedback from the public starting yesterday till Aug 6.
“With the benefit of practical experience in regulating and managing the casinos over the past two years, a review of the casino regulatory regime and the Casino Control Act is therefore timely,” the Singapore government reportedly said in a statement.
The key proposals included raising the maximum fine allowable for disciplinary action taken against casino operators to 10% of gross gaming revenue from the current SG$1mil limit.
Another proposal involved junket operators, also known as “international market agents” (IMA), where the CRA would have the power to set a cap on the commission payable to them by casino companies.
Back in March, the CRA gave out its first IMA licences, which must be renewed annually, to two Malaysian junket promoters endorsed by Resorts World Sentosa.
IMAs can only target the international market and not Singaporean citizens or permanent residents.
One of the proposals would empower the CRA to suspend or cancel an IMA licence “if it is in the public interest to do so,” while the onus to detect and block unlicensed IMA activity would be on the casino operators, according to a posting on the government's public engagement website.
An “evaluation panel” may also be appointed by the Trade and Industry Ministry to give its opinion to the CRA on the performance of both integrated resorts for the latter's consideration when processing casino licence renewal applications.
Furthermore, VIP high rollers may be required to draw down their SG$100,000 deposit before they can receive more credit from casino operators.
In response to this, Maybank Kim Eng downgraded Genting Singapore to “hold” from “buy” and reduced its target price to S$1.40 from S$2.00.
It said in a note to clients the proposed amendments would be “detrimental” to the company's VIP volume if passed, possibly eroding up to 25% of earnings before income tax, depreciation and amortisation in the worst case scenario.
An analyst from RHB Research Institute told StarBiz it was difficult to estimate exactly how far the proposed changes would go in affecting both Genting and Genting Singapore's financials, adding that this could be a “long drawn out affair”.
“A lot would ride on the implementation. You may be able to stop people at the door, but you wouldn't know who the problematic players are once they get in,” she said.
Other analysts concurred that it was too early to jump to any conclusions, saying they would wait for more clarity from the companies and the government.
“Nothing is yet set in stone,” one of the analysts said.
[Source]
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