MERRILL Lynch has tipped Genting International as having a 75
per cent chance of winning the Sentosa integrated resort bid,
although the investment bank report goes on to say that losing the
bid could send Genting's stock down by 30 per cent to 27 cents a
share.
In the report, released yesterday, Merrill Lynch scored each of the
Sentosa bids on total tourism appeal, architectural design,
investment and strength of the consortium - the same criteria as
the government is using to judge the bids.
The investment bank gives Genting International a total score of 88
per cent, while the Kerzner International-CapitaLand consortium
scored 82 per cent. Eighth Wonder came in with the lowest score, at
79 per cent.
Overall, the report said that Genting International has a 75 per
cent chance of winning Singapore's second casino licence.
It added that a win for Genting could see its stock jump 22 per
cent to 47 cents a share with a 30 per cent possible downside if it
fails. It said a win for CapitaLand could see the stock rise to
$6.50 a share, while a loss could see the stock drop to around
$5.70 a share.
CapitaLand shares closed 15 cents up at $5.90 a share yesterday,
while Genting International shares remained unchanged at 38.5
cents.
Based on the process used for the Marina Bay licence, the report
reckons that a government decision on the winning bid could come
between the dates of Dec 4 and 8.
In evaluating the bidders, the report also took into consideration
market knowledge, operational leverage, tourism delivery and
execution risk.
'We believe Genting will be viewed as having greater market
knowledge, given it is the only bidder to have operated in Asia,'
the report said. 'Kerzner has not operated in Asia previously, and
its expertise lies more as a property company than gaming. While
Eighth Wonder has pulled in Publishing and Broadcasting Ltd (PBL)
and Melco into its syndicate, we question the value given the small
shareholding.'
The report said Genting can build on its experience with Star
Cruises and Genting Highlands, as well as UK casino company Stanley
Leisure, although the Eighth Wonder consortium may find it
'difficult' to use its PBL and Melco ties, given the 'regulatory
challenges this syndicate may face in combining its Singapore
operations with Macau'.
In analysing the individual bidders, the report also looked at the
strengths and weaknesses of each.
It noted that Genting International had market knowledge,
operational leverage, a Universal theme park, a good record on
probity, and stability. It said the 'only weakness' in Genting's
bid was that 'Genting is a Malaysian company'.
For the Kerzner-CapitaLand consortium, the report said that its
Frank Gehry-designed resort 'appears to excite various academics
and architects', and noted Kerzner International chairman Sol
Kerzner's 'reputation for developing world beating
attractions'.
'Our principal concern lies in the US$3.3 billion investment, and
the fact that with such limited local knowledge and experience in
the Asian gaming market, how are they going to effectively compete
with Las Vegas Sands and achieve an adequate return to
shareholders,' the report said.
On Eighth Wonder, the report said a clear strength was the 'level
of creativity' associated with its proposed Harry's Island concept,
as well as its 'varied list' of partners.
However, it also noted that the 'almost eclectic group of unrelated
attractions gives us the impression the group was trying every
means to find partners to join to make the bid look more
impressive'.
'Syndicates that form an amalgam of eclectic entities can often
have trouble establishing a shared vision, and importantly, holding
the vision,' the report said.
The government has said that tourism allure will account for 45 per
cent of the marks upon which bids are judged, followed by design at
25 per cent, while investment amount and investors' track record
make up 20 and 10 per cent respectively.
