US tribal casino management on the cards for Genting?

PETALING JAYA: Genting Malaysia Bhd may be venturing into tribal casinos in the US after the gaming giant restructured the shareholding of its indirect wholly owned unit, Genting Massachusetts LLC, on Jan 27, 2016.
“We gather that GENM (Genting Malaysia) may be aiding the Mashpee Wampanoag tribe in building and managing a casino 45 minutes from Boston in return for interest income and management fees.
“Due to lack of details, we are unable to quantify its impact but gather that this development cannot be negative to GENM,” said Maybank Investment Bank (MaybankIB) Research in a note last Friday.
MaybankIB Research maintained its “buy” call on the gaming group with a target price of RM4.75 pending its results for the fourth quarter ending Dec 31, 2015, which will be released on Feb 23, 2016.
Tribal casinos are part of native American gaming on Indian reservation land or other tribal land in the US. Because these areas have tribal sovereignty, states have limited ability to forbid gambling there, as codified by the Indian Gaming Regulatory Act of 1988.
On Jan 8, 2016, the Mashpee Wampanoag tribe of Massachusetts’s 170 acres in Mashpee and 151 acres land in Taunton was recognised as reservation land. As a result, the tribe is now able to build their US$500 million (RM2.08 billion) First Light Resort & Casino in Taunton under the Indian Gaming Regulatory Act.
The resort includes a 150,000 sq ft casino, 600 hotel rooms, 3,000 slot machines, 150 tables and 40 poker tables and an events centre. It is expected to open in 2018.
According to MaybankIB Research, Genting Malaysia has a management agreement with the Mashpee Wampanoag tribe whereby Genting Malaysia will provide the tribe some initial financing and will manage the casino for seven years from opening.
“Not many details were forthcoming (for example, initial financing amount, management fee rate) other than that the gaming tax rate is set at 17% of gross gaming revenue and the tribe has promised the state at least US$2.1 billion in taxes over 20 years. This is because tribes are not obliged to disclose their finances publicly,” it said.
MaybankIB noted that Genting Malaysia is not permitted to hold shares in the resort but it can derive interest income on the financing amount and management fees.
“This may even be preferred as we gather that competition will be keen with MGM Resorts building a casino in Springfield and Wynn Resorts building one in Everett. Both are expected to open in 2018. As this development is hard to quantify and beyond our investment horizon, we leave our earnings estimates unchanged for now,” it said.