Genting sells Korean casino to focus on Japan

Genting sells Korean casino to focus on Japan

Monday, November 14, 2016 Posted by Andy McCarron
Resorts World operator marshals resources

The future of the casino sector in South Korea is under the spotlight after Genting Singapore sold up its share of the Jeju Resorts World joint venture to its erstwhile partner.

The news came a matter of months after Bloomberry, which is also seeking to exit the market in Jeju, confirmed it was struggling to find a buyer for its property after crisis-ridden Macau junket operator Iao Kun Group pulled out of a buyout agreement.

The Genting Singapore sale will see Landing Singapore assume full control of the property with Genting receiving $420m for its half share. The buyout price represents a small premium on Genting’s aggregate investments in the project of $381m. The payment will be made in two tranches of $200m each, one on completion and one six months hence.

The company said the sale was part of its strategic shift to concentrate on “affluent target markets” including Japan where operators are awaiting news regarding the potential legalisation of gaming. The statement said it was “optimistic” the bill will be enacted in the near future then subsequently the company would need “significant resources” if it was to play a part in the bidding process. “This opportunity is of significant value to the growth of the Group,” the statement added.

Analysts at Union Gaming noted that joint ventures in markets such as South Korea were “complicated even in the best of times.” Analyst Grant Govertsen added: “Compounding this, in our view, was that the joint venture combined two non-Korean entities trying to navigate development in a jurisdiction that offered neither partner any sort of home-field advantage.”

Similar thinking lay behind Bloomberry’s decision to sell up though that decision is now in abeyance after Iao Kun succumbed to the inevitable and let the deal lapse at the end of September. Iao Kun is now down to one VIP gaming room in Macau and in early October announced revisions to it second quarter results including a $21.5m writedown.

The Union Gaming team suggested last week that Bloomberry’s task in finding another buyer has got significantly tougher following the Genting news.

Jeju has eight small, foreigner-only casinos which between them generated $178m in gross gaming revenue in 2015, down 6% on the year previous. The Resorts World IR project (now likely to be renamed to reflect the sale by Genting) is still under construction and is likely to open late next year or early 2018. A second IR called the Dream Tower is being built by Lotte Tour Development while a third development is being considered by a company called New Silkroad.

Union Gaming says the Jeju gaming market traditionally thrives off its position as a gateway for Chinese tourists and on this basis the analysts remain optimistic about the market overall, albeit with the caveat that the recent harder line taken by China on corruption is clearly having an effect there as much as it has on other Asian gaming markets.

Totally Gaming says: Genting has clearly decided it has bigger fish to fry in the Asian gaming theatre. We are still awaiting news from the Japanese Diet, but with Macau enjoying a recent revenue bounce and Singapore showing signs of following it, Genting’s re-aligning of focus makes a lot of sense.

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