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They Are Multinationals Now

Some of gaming's biggest companies today transcend national boundaries.

They Are Multinationals Now

The gaming industry’s ever-more-rapid evolution has created multinational companies—that is, companies that are headquartered in one country, but do most of their business elsewhere.

The two best-known of these are Las Vegas Sands (LVS) and Wynn Resorts (WYNN). They have grown so rapidly overseas that they are often called Chinese or Asian companies. Both get 80 percent or more of their EBITDA in Asia.

The third company that fits this category is Genting, which actually is a conglomerate with three publicly traded subsidiaries in the gaming industry—Genting Malaysia, Genting Singapore and Genting Hong Kong. We discuss Genting’s structure below.

But what is interesting is how it seems to be developing into something of an archrival with Las Vegas Sands. Earlier, it seemed that LVS and WYNN were something like siblings—related companies but rivals as they both are Las Vegas-Macau centered and go after affluent customers. Now, however, it’s Genting that seems to be wherever LVS wants to be.

LVS and Genting are battling it out in Florida for different versions of legislation to allow mega-resort casinos. Genting wants to convert its Resorts World slot palace in New York City into a full-fledged casino accompanied by the nation’s biggest convention center. LVS would like to take over the Big Apple’s current Javits Convention Center in Manhattan for its own mega-resort. Both companies are interested in Vietnam. And, of course, they battle daily in Singapore, a market about to generate $3 billion a year in EBITDA.

Nor are they operating on a small scale. Each would spend several billion dollars in Florida. Adelson is proposing a $35 billion multi-resort complex in Spain and is just opening his $4.4 billion Cotai Central in Macau, which will be followed by another mega-resort.

He proposes two mega-resorts each in Japan, South Korea and Vietnam. Genting has expressed interest in Vietnam, too.

And, of course, they are the only two rivals in Singapore.

Genting also is building a mega-resort in the Philippines, has raised $1.8 billion in debt and plans another note sale of $550 million, all to finance growth. Some of that might be acquisitions. Australia’s Echo Entertainment, which generated $450 million in EBITDA last year, is a speculated target.

In addition to size, ambition and a shared business model of integrated resorts heavy on the convention business, Genting and LVS share two other attributes: founding family control, and publicly held subsidiaries offering investors alternate ways to play them.

Genting is a Malaysian conglomerate that, in addition to gaming and resorts, has power generation and industrial operations. The parent company trades on the Malaysia stock exchange and is 39.6 percent family-owned.

Publicly traded subsidiaries include:

• Genting Malaysia, which owns the world’s biggest casino resort, the 8,000-room Resorts World in Malaysia, and U.K. and European gaming operations both online and bricks-and-mortar.

It also owns Resorts World at Aqueduct and would be the developer of a Florida resort.

Genting Malaysia also trades on the Malaysia stock exchange.

Interestingly, Genting Malaysia has its own publicly traded subsidiary, Genting Hong Kong, which is developing Resorts World in the Philippines. Genting Hong Kong also owns Star Cruises, and 50 percent of Norwegian Cruise Lines along with Apollo Management and TPG.

Appropriately, it trades on the Hong Kong stock exchange.

• Genting Singapore owns Resorts World Sentosa in Singapore and trades on that nation¹s stock exchange. It is the company that has raised $1.8 billion and might buy Echo.

Las Vegas Sands and Wynn have their Macau operations in public subsidiaries that trade in Hong Kong, Sands China and Wynn Macau. The companies are giants by gaming standards.

Genting generated about $2.7 billion in EBITDA last year, of which about $2.3 billion came from its gaming and leisure operations. The biggest contributor was Genting Singapore at about $1.35 billion. Genting Malaysia generated about $900 million from its home operations and about $65 million in the U.K. and U.S. The U.S. number will grow significantly this year with Resorts World Aqueduct open a full year.

LVS is by far the largest of the three multinationals in terms of EBITDA, as it is projected to grow to $5 billion next year. That compares to $1.8 billion for WYNN.

Of course, as Steve Wynn said in his famous exchange with Adelson, he believes bigger isn’t better, better is better.

An investor wanting to play the multinationals has to take personality into consideration. These aren’t faceless operations where a qualified replacement can be plugged in as CEO or chairman. They reflect the personalities of their founders.

One family has run Genting for several generations, providing a stability that should comfort the truly long-term investor who views himself as a minority owner of a business.

LVS and WYNN are run by strong-willed founding geniuses whose success so far has depended greatly on their vision.

Meanwhile, the companies have growth plans in place that should carry them ahead for years, a long enough time for most investors.

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