Genting’s stock downgraded to “hold” after Singapore gov’t proposes new casino laws

TAGs: casinos, Genting Singapore, government, Marina Bay Sands, Singapore

maybank downgrades genting stockThat didn’t take long, did it?

Days after news broke out about Singapore’s plan to toughen its casino laws, Maybank Kim Eng, a group of companies that comprise securities and investment banking businesses, has downgraded Genting Singapore‘s shares from “buy” to “hold” while also cutting its target price from S$2.00 to S$1.40.

Late last week, Singapore announced that it was planning on allowing the Casino Regulatory Authority the power to impose more stringent fines that could reach as much as 10% of annual revenues generated by Genting Singapore and Las Vegas Sands on their respective casinos, Resorts World Sentosa and Marina Bay Sands.

The significant increase in fines stem from numerous incidents involving both casinos wherein they’ve admitted minors while also permitting locals and permanent residents to play in the casinos without paying the S$100 entry fee. Despite posting profitable numbers that few other establishments can compare to – both casinos generated gross revenues in 2011 of over S$2 billion – the new 10% penalty meted down by the CRA could potentially cost both Resorts World and Marina Bay Sands up to $200 million, a significant increase from the CRA’s current maximum penalty of “just” S$1 million.

According to the Strait Times, the changes were announced a certain S. Iswaran, a minister in the Prime Minister’s Office, who said the proposed revisions will “help ensure Singapore’s two multi-billion-dollar casino-resorts remain full-fledged tourist destinations, (and) not just casinos with frills”.

As a result of this new sanction, Maybank Kim Eng has already forecasted Genting to lose some traction in the market, and it didn’t take long for the shares to lower its value by 1.1% at S$1.39. The investment firm also predicted that with the proposed amendments being instituted, both casinos will experience a slow down in business, particularly in VIP volumes that has been providing ample revenue sustenance for the two casinos.

It’s certainly worth noting that S$1 million is significantly cheaper than S$200 million; no calculators needed there, either.

If this amended sanction comes to pass, which a lot of people expect it will, possibly even as soon as the end of the year, both Resorts World and Marina Bay Sands better be on their best and most stringent behavior in order to not only avoid losing 10% of their gross revenue pie, but keep their stock prices as clean as tidy as can be.


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