Star Cruises soars on rumours of Macau stake bid

PUBLISHED : Tuesday, 26 May, 2009, 12:00am
UPDATED : Tuesday, 26 May, 2009, 12:00am

Shares in Star Cruises soared 19.19 per cent yesterday on speculation the company may emerge as a potential bidder for MGM Mirage's 50 per cent stake in a Macau casino joint venture with Pansy Ho Chiu-king.

The cruise operator and casino developer controlled by Malaysia's Genting Group added 19 HK cents to end at a nine-month high of HK$1.18 after an analyst said Genting might be one of the parties eyeing financially troubled MGM's stake in MGM Grand Paradise, the joint-venture developer of the US$1.25 billion MGM Grand Macau.

'Although it is too premature to speculate on such an outcome, considering the intricacies of the licensing agreement, we believe that given Genting's strong appetite for large-scale casino investments in Macau, this could certainly pave the way for the group's long-awaited entry into Macau's gaming market in a meaningful way,' OSK Research analyst Keith Wee wrote yesterday in a research note.

MGM has struggled in recent months to avoid defaulting on portions of its US$14.4 billion in debt and last week raised US$2.5 billion by selling shares and bonds to help offset the debt burden.

At the same time, the Las Vegas gaming giant's Macau venture last week came under fire from gaming regulators in the US state of New Jersey, who recommended Ms Ho be found 'unsuitable' as a partner and said MGM should be 'directed to disengage itself from any business association with its Macau joint-venture partner'.

That raised the possibility that MGM would be forced to choose between selling the Macau casino and cashing out of its 50 per cent stake in Atlantic City's Borgata casino resort.

Speculation over potential buyers for the Macau stake was focused on Genting after two of its Malaysian units - Genting Bhd and Resorts World Bhd - disclosed last week they bought US$100 million worth of the MGM bonds.

Genting is building a large-scale casino resort at Manila Bay in the Philippines.

'Star Cruises' plate is full with the land-based casino in the Philippines and the firm is heavily geared, so I don't think they are in a position to take on another large-scale investment,' Mr Wee said.

He said Resorts World, owner of Malaysia's monopoly casino at Genting Highlands, would be a more likely vehicle. 'That is where most of the group's cash is sitting.'



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