Genting Singapore's Jeju exit 'premature': analyst

Here are three reasons.

OCBC Investment Research finds Genting Singapore (GS)’s move to dispose of its Jeju stake aggressive, but sees it as a premature exit from one key area of growth.

"There still remain key risks to its pursuit of the Japanese casino license," the research house said.

First, it notes that the first casino bill in Japan has yet to be debated and passed. Secondly, the second bill may allow only foreigners and not locals to enter the casino. And lastly, even if the above is satisfied, GS still has to beat several other international casino players such as Las Vegas Sands to win the license.

The current Japanese Diet session is to end 30 Nov 2016.

GS has entered into a conditional sale and purchase agreement to dispose of its 50% interest in the Jeju JV for US$420m. The disposal is expected to complete in 1Q17, conditional
upon counterparty Landing International Development obtaining shareholders’ approval for the disposal.

The aggregate consideration represents a 10% premium to the group’s contributions to the JV Co.

GS has cited its intention to focus on growing within its home base in the near-term.

In addition, GS expects Japan’s casino bill to be enacted in the near future and anticipates that significant resources will need to be devoted to position the group as a strong candidate for the bidding process.