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Is This a Road Block for Genting Singapore’s Growth Plans?

Genting Singapore

Genting Singapore (SGX: G13) had announced earlier this February that it would be developing a new integrated resort in South Korea’s Jeju Island.

The S$2.5 billion project will be a joint development with Hong Kong-listed Landing International Development Ltd. Based on its plans, Genting Singapore’s new project is supposed to be Jeju Island’s largest tourism resort to date and it would house hotels, a theme park, a shopping complex, a casino and even residential properties, amongst other facilities.

The Jeju Island development is supposed to be the next big growth engine for Genting Singapore after the company’s integrated resort at Resorts World Sentosa first opened its doors in 2010. It would also be a form of diversification for Genting Singapore as Resorts World Sentosa, which is based in Singapore, currently represents the sole source of income for the company.

To put it into perspective the scale of the Jeju development, Resorts World Sentosa had cost about US$4.9 billion (around S$6.59 billion) in total for the company.

A road block ahead

Unfortunately, Genting Singapore declared last week that it has rescheduled the ground breaking ceremony for the Jeju Island project. This comes after all the invitations for the event have been sent out.

The slightly unfortunate twist happened because there is a newly-elected governor in Jeju and the company will need to re-brief the local government about the project and how it will contribute to the economy of Jeju Island. With the groundbreaking ceremony delayed, the project is now expected to be completed by 2017.

Competition is rife

Unlike Singapore, which has only two casinos, South Korea already has 16 foreigner-only casinos; the main visitors to those South Korean casinos are mainly tourists from China and Japan. Therefore, it might be unrealistic to assume that the new integrated resort in Jeju Island will be as profitable as Resorts World Sentosa due to the higher level of competition prevalent in South Korea.

Growth engines elsewhere

Besides the new project in South Korea, Genting Singapore is also looking at Japan as a possible avenue for growth with the proposed gaming legislation to legalize casinos in the country. Furthermore, the company is also developing a Genting Hotel in Singapore’s Jurong Lake District that is supposed to be open by next year.

Foolish Summary

This delay in the Jeju Island project might just be a temporary blimp. With the new development, Jeju Island would be positioned to have a strong appeal to its largest tourist group, the Chinese. Already accounting for about one third of South Korea’s tourism inflow, the Chinese is also one of the fastest growing tourist groups for the country, growing 53% since 2012. In short, Genting Singapore’s development there comes with potential economic advantages that can be earned by Jeju Island.

Genting Singapore might just scale to new heights if this new project is successful.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.