And, there is more, much more.
Despite this amazing past, a seminal event that will shape Genting's future is
about to occur-the opening of Resorts World Sentosa in Singapore, a
mega-mixed-use casino-resort destination.
There may be no other company in the
gaming industry as fascinating or with the future of Genting. This is its
story.
The Visionary
Bill Harrah, Benny Binion, Sol
Kerzner, Sam Boyd, Steve Wynn and Tan Sri Lim Goh Tong... All of these are
patriarchs of start-up companies catalyzed by a spot-on vision for what
consumers needed and wanted, but what the industry was not providing. These visions
were all executed by the inner force of personality of their leaders, a
requisite needed to overcome the challenges to initially succeed and then to
continue to accelerate growth in the complex, competitive and capital-intensive
gaming industry.
While historically not a household
name in the Western gaming industry, the Chinese-Malaysian founder of Genting,
Tan Sri Lim Goh Tong, deserves to be in this company-and, one might also say,
vice versa. (Note that Tan Sri is a rare Malaysian honorary title bestowed upon
him. Lim is the family surname, appearing first in the Chinese tradition, and
Goh Tong are the given names that follow.)
The force Lim embedded in Genting can
be well understood when one understands the forces that shaped the life of its
founder. Upon his father's death he was forced, at the age of 16, to leave
Fujian Province in China and emigrate to Malaysia with nothing but a suitcase
and $175. Tragically, soon after he arrived in Malaysia, the Japanese occupied
the country, found Lim, and sent him back to China. Ironically but tragically
again, Japan occupied Fujian Province, forcing Lim to once more return to
Malaysia.
Once settled in Malaysia, Lim began
his business career as an engineering contractor. As fate would have it, while
working on an engineering project he visited Cameron Highlands, a mountaintop
resort made popular by British colonists seeking to escape the heat in the
cities below. Lim decided that he, too, wanted to build a retreat for his
family and other Malaysians, but one that was closer to the population center
of Kuala Lumpur.
In searching for a site, he found
what he was looking for only 36 miles away and 5,900 feet above sea level. But,
in what elusively seems to differentiate true visionaries from wannabes, Lim
saw the potential to build a full-scale resort.
To secure the site from the
government, Lim was forced to build a road to the almost 15,000-acre site with
his own money.
In a twist of fate, this proved
fortuitous, because Lim completed the construction of the road on time. As the
thankful prime minister of Malaysia was helping to lay the first cornerstone,
he surprised Lim by offering to give him a country-wide monopoly license for a
casino that still exists today. While this may not have been initially seen as a
great boon, because Malaysia is a Muslim-majority country whose religion
forbids gaming, Malaysia also has a large and wealthy Chinese community with no
such restrictions. And, little did anyone know, through Lim's vision and drive,
the initial inauspicious 200-room resort that opened in 1971 with a 30-table
casino would morph into one of the largest and most prestigious resort, gaming,
entertainment and meeting/convention destinations in Asia by the end of the
century. The casino would cater to Chinese-Malaysians and foreign tourists, and
the non-gaming activities would appeal to everyone, including non-gaming Muslim
Malaysians.
The original Highlands Hotel is now
known as Resorts World Genting, and offers some 500 table games and 3,000 slot
machines; six hotels with 10,000 hotel rooms; some 30 restaurants and bars
offering everything from lattes to haute cuisine; over 50 thrill rides
contained in both outdoor and indoor theme and water parks; a Snow World,
climbing wall, cineplex, Ripley's Believe It Or Not Museum and bowling alley;
170 dining and shopping outlets; an array of entertainment venues that include
a showroom, arena, hall, convention center and a number of informal venues;
150,000 square feet of business convention facilities; a 6,117-meter, par-71
golf course; a gym, a spa, and too many other activities and events to
count.
The resort often first appears to
newcomers as an apparition-castle-like hotels peeking through early morning
clouds. It is other-worldly, unexpectedly impressive, and gets your heart
pumping faster with anticipation before you even fully arrive. As testimony to
Genting's ability to understand the needs and wants of its target markets,
Resorts World Genting hosted almost 20 million visitors in 2007.
Less known but also influential in
the gaming industry have been Genting's gaming development and management
agreements in Australia, the Philippines and the Bahamas; stakes taken in
Canada's Pacific Lottery Corporation; United Kingdom's Rank PLC and London
Clubs International; and start-up funding of Foxwoods in Connecticut and the
Seneca casino in Buffalo, New York. Genting's diversification outside of gaming
started in 1976 and continues to this day (see sidebar, page 26).
Lim retired in 2004 and died in 2007.
However, the bloodline's vision and vigor continued seamlessly and steadfastly
with the stewardship of the company by his son, Tan Sri Lim Kok Thay, as events
after 2004 demonstrate-and as the impending opening of Resorts World Sentosa
will decidedly reinforce.
A Seminal Event
The dramatic changes in casino
development over the last 30 years have gone from seven-figure to 10-figure
investments, and from single-billion to multiple-billion-dollar projects. And
nobody blinked. Resorts World Sentosa is approximately a US$4.5 billion
project. It is a mega if not a meta project.
To place the project into scale, the
site encompasses approximately 121 acres, about four holes short of what it
takes to accommodate an average golf course. It will take somewhere in the
neighborhood of 10,000 employees to operate the mega-resort when fully open.
The list of activities reads like a list of leisure, entertainment and
recreation activities for a major destination with multiple resorts, not a
single project. (See Resorts World Sentosa sidebar, page 30.)
Resorts World architects and
designers have developed a clever master plan, and emotion-evoking architecture
and design that will complement and amplify employee-generated "This Trip
Experiences" and create visual memory glue for years to come. Indeed,
Resorts World Sentosa is the next new must-see gaming, leisure and
entertainment destination.
In one bold move, Resorts World
Sentosa propels Genting from being essentially a one-project, Malaysian gaming
operator with some "other" gaming operations thrown in to being a two
mega/meta-project, gaming-centric operator with combined investment equivalent
to 12 or more typical gaming operations of its peers.
Often historically under-noticed and
under-appreciated by most Westerners, Genting will soon become too big a
competitor to ignore-in Asia or, for that matter, anywhere else in the world.
Long overdue but overdue no longer. And, the industry is the better for it.
Producing Results
Even if Resorts World Sentosa is
indeed the absolutely, unequivocally, stunningly world-class resort it strives
to be, in capitalism, winning design awards or even moving the emotions of the
purchasing public means little unless such actions achieve target financial
results.
This is problematic because Resorts
World Sentosa was conceived in broad strokes by the government of Singapore and
then dialed in and detailed by Genting prior to the onset of the current
economic crisis.
The government chose to issue only
two casino licenses as the carrot to require each winning bidder to
conceptualize and build a world-class, iconic integrated resort. The objective
was to recover Singapore's slippage as one of Asia's top visitor destinations
and, specifically, to increase visitor count from 10 million to 15 million by
2015.
These goals implicitly raised the
ante of the casino license, but when combined with the bidding frenzy, they led
to the submittal of the two intended iconic resort proposals (albeit at a very
high level of investment). Post-bid, the investment went higher still, as the
costs to execute the dramatic designs were realized, the concepts were
fine-tuned, and construction encountered some unexpected increased costs.
No one would probably have said much
had the world and regional economies continued to march forward at pace. They
did not. And now this project and, for that matter, every other project around
the world of this magnitude that began construction pre-economic crisis, is
being met by the headwind of the direct and indirect effects of this crisis. Birthed
in an era of bigger-is-better, build-it-and-they-will-come mentality, we may
not see projects like this again for some time to come.
So, what is or should be the desired
result for Resorts World Sentosa? Mere company survival is a significant
accomplishment these days for any development of this size. Being able to pay
down debt without triggering debt covenants is another.
On the equity side, it may simply
mean having a stock price finally hit bottom and start to show signs of
recovery. Taking it up a notch, returns on invested capital that provide some
spread, any spread over cost of capital that would not have been considered
inspired performance before the economic crisis (e.g., EBITDA return on
invested capital or ROIC of 12 percent to 13 percent) but in 2010 will be
welcome by many.
For projects of this size in today's
economy, mid-teen ROIC during a start-up period would be cause for applause.
And, long-term prospects of a high-teen ROIC for a mega-project such as this
today would make most investors giddy. In short, for the time being, the
efficacy of Resorts World Sentosa should be evaluated based upon recalibrated
expectations.
Even so, given all of the uncertainty
that exists within the marketplace today, can the financial performance of
Resorts World Sentosa fit into a lowered but tighter and realistic financial
performance expectation matrix? The answer is a definite "yes" over
the long term, up to and including the possibility of performance returning to
the high end of the performance envelope.
It is a highly probable
"yes" over the immediate term based upon recalibrated expectations.
The initial opening period is less certain given the uncertainty of world and
regional economies. Certainly a "yes" answer is a likelihood, but if
a material threat or combination of threats conspire unexpectedly, it could
also be a temporary "no" until Genting can fix it. Speculation aside,
the actual outcome will be a function of the following Singapore and Resorts
World Sentosa dynamics.
Singapore Potential
Here is what some of the analysts are
saying. Their fully open and stabilized forecasts of total gaming revenue for
both Singapore casinos seem to cluster in the mid-US$2 billion to US$4 billion
range, although some are saying the upside market potential could be as high as
US$6 billion with an outlier of US$9 billion.
Splits between the two licensees seem
to range from an even 50:50 split to 55:45 tipped in favor of Marina Bay Sands,
because of a perceived more favorable location, presumed positioning toward the
upper end of the market and more serious gambler, and less focus on family and
other less gaming-synergistic amenities. The results for 2010 vary from here
based on when a given analyst feels each property will open, what activities
will be available in Phase 1 (the Singapore government imposed a 50 percent
"readiness" quotient to open the casino), and how quickly the remaining
activities will build out.
The bulls of Genting Singapore stock,
the subsidiary where Genting holds Resorts World Singapore, tend to justify
their "buy" recommendations by gravitating toward the high end of
Singapore market forecast and/or use the high end of Asian gaming stock
price/earning ratios to get to a stock price with enough upside over the recent
trading range of US$0.75 (S$1.00 to S$1.10) per share.
This translates into Singapore market
annual gaming revenue in the US$4 billion range and/or P/E ratios of 15 times
or more. The bears argue for less. There are many sub-arguments in between the
major assumptions.
Stepping away from the analysts'
recommendations, using easy math and some generally accepted industry metrics,
to achieve a 15 percent EBITDA return on invested capital on the US$4.5 billion
investment in Resorts World Singapore requires an EBITDA of US$675 million.
Assuming an EBITDA margin of 26 percent, this implies $2.6 billion in annual
total revenue. Continuing with an assumed ratio of annual gross gaming revenue
to total revenue of 70 percent, this results in a target annual gross gaming
revenue of approximately $1.8 billion.
If Resorts World Sentosa produces 50
percent of Singapore's combined gaming revenue, then the annual combined Singapore
gross gaming revenue would need to be in the US$3.6 billion range in a 50:50
split with Marina Bay Sands and in the US$4.0 billion range in a 55:45 split
with Marina Bay Sands.
Notwithstanding financial
performance, there will be an underlying strategic value to opening a
mega-integrated resort in Singapore. This includes not only marketing synergies
with Genting's other gaming operations-Resorts World Genting, Star Cruises, and
its other international casino operations-but also the boost such a prestigious
project operating in the squeaky-clean environment of Singapore will mean to
Genting when bidding on what is certain to be a rekindled interest in new and
expanded gaming venues throughout Asia and beyond-e.g., Japan, Taiwan,
Thailand, Philippines and someday, perhaps mainland China.
No matter what third parties say, the
initial high performance at Resorts World Sentosa is not a company
life-or-death issue for Genting. The company is large, diversified and sitting
on a fair amount of cash. In terms of risk management, the company has not
overly leveraged the Sentosa project, is taking a phased approach, and has
unspoken-for land yet to develop. And, as already mentioned, its executives are
seasoned in gaming, operating and marketing in this specific region, and adept
at working through challenges.
As this article was going to press,
Genting announced that it planned to open the Crockfords Tower, Hotel Michael
and Hard Rock Hotel on January 20, translating into 1,350 available rooms and
10 restaurants. The casino opening is predicated upon Resorts World Sentosa
receiving approval to open Universal Studios Singapore. This is expected early
in 2010. Opening of the remaining facilities will take place in 2011.
Genting can be proud in winning one
of the two Singapore casino licenses, and even more proud of what its
development team has conceptualized and executed, a truly stunning project. The
"bones" are there. So are the inspiration, creativity, innovation and
passion.
Under the careful stewardship of Genting,
Resorts World Sentosa will be a great, memorable and emotion-evoking place to
gamble, dine, imbibe, attend a meeting, shop, play with your kids (and be a kid
yourself!), vegetate, cogitate, relax and just plain visit. Slow or fast, but
inevitably, Resorts World Sentosa will fulfill its purpose for all of its
stakeholders.
This third article is talk about Genting Berhad and how
Tan Sri Dato Seri Lim Goh Tong to get idea to build up Genting and the process
to start the business. He visited Cameron Highland and gets the idea to build
up Genting Highland. This article has talk about how he finds the location and
how he builds up and how he preserves his Genting group. He retired in 2004 and
Tan Sri Lim Kok Thay takes over his company and opening of Resorts World
Sentosa in Singapore.
After I read this article, I felt Tan
Sri Dato Seri Lim Goh Tong build up Genting is not easy job or lucky. He has
business sense and never give up although face a lot of problem. Until
today, Genting was granted the only casino license in Malaysia. Because of
his persistence, he was being a successful entrepreneur and Malaysia more than
a tourist attraction. He not only made money, but also the benefit of
everyone.
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