Casino fallout hits Star Cruises stock

PUBLISHED : Thursday, 08 March, 2007, 12:00am
UPDATED : Thursday, 08 March, 2007, 12:00am

Shares drop up to 18.8pc after company exits Singapore deal and announces costs for Macau project rise to HK$3.5b

Shares in Star Cruises sank as much as 18.8 per cent yesterday after the company pulled out of a US$3.4 billion Sentosa Island casino resort to appease Singapore's gaming regulators.

The stock was also hurt by an announcement that the company would need an additional HK$875 million to fund a Macau casino to be operated by Stanley Ho Hung-sun.

The world's third-largest cruise liner, a unit of Malaysia's Genting Group, said it would now shoulder HK$3.5 billion of the total HK$4.7 billion investment cost for the Macau project, 33 per cent more than its previous commitment announced in January.

The difference was supposed to be funded by the cruise line's Singapore-listed sister firm Genting International, which pulled out of the project during the weekend, when both companies agreed to swap stakes in the Singapore and Macau casino developments in order to ease the city state's regulatory concerns over their partnership with Mr Ho.

In January, Mr Ho, with his fourth wife Angela Leong On-kei, acquired a 4.6 per cent stake in Star Cruises, and his privately held Sociedade de Jogos de Macau agreed to operate the planned Macau casino.

Shares in Star Cruises, which had been suspended since Monday, yesterday closed 8.97 per cent lower at HK$2.13.

The company said it still had not decided how it would meet the increased funding requirement for the Macau project. In the weekend deal, Star Cruises sold its 25 per cent stake in the Sentosa casino complex to Genting International for a yet-to-be determined price. In turn, Genting unloaded its 19 per cent interest in the Macau casino to Star Cruises at cost.

The swap was engineered to placate Singapore's Casino Regulatory Division, which confirmed last week it was conducting 'suitability checks' on the Genting firms and associates before issuing the licence to operate the Sentosa casino.

Suitability checks are common within the gaming industry, but Mr Ho has in the past declined to follow through with such probes in jurisdictions outside Macau.

While the restructuring eliminated Star Cruises' direct equity position in the Sentosa casino, one source doubted that it would satisfy Singapore officials, as both firms ultimately are controlled by the Genting Group and its chairman Lim Kok Thay. 'It's like they are rearranging the deck chairs on the Titanic,' said the source.

A spokesperson for Singapore's Casino Regulatory Division did not return telephone calls or e-mails last night.

Star Cruises' stake in the Macau project now stands at 75 per cent. Local partners Yany Kwan Yan-chi and his brother Kwan Yan-ming hold the remaining 25 per cent interest.