KUALA LUMPUR: Genting Malaysia Bhd’s indirect wholly-owned subsidiary Genting New York LLC (Genting NY) is one step closer to clinching the project to develop and operate a video lottery facility at the Aqueduct Racetrack in New York City.

In its filing with Bursa Malaysia yesterday, Genting said its unit on Wednesday received the recommendation of the New York State Division of Lottery to implement the “racino” project that would contain about 4,500 electronic slot machines.

The recommendation, however, would have to be approved by the New York state’s governor, the temporary president of the New York state senate and the speaker of the New York state assembly before the video lottery licence could be awarded to the company, Genting said.

Genting NY was the sole bidder for the racino project after two others – Penn National Gaming Inc and a consortium led by real estate developer SL Green Group – were disqualified last month for submitting non-complying bids.

The racino project involves an upfront payment of US$380mil as licencing fee to the New York state. Genting expects the preliminary phase of video lottery facility at the Aqueduct Racetrack, which will be called Resorts World New York, to be opened six months after the licence is awarded.

The preliminary phase will involve 1,600 slot machines. The second phase of the project, involving the remaining slot machines, will be opened in the following six months.

Analysts said while winning the project could be positive for Genting, earnings contribution to the group would likely take one to two years to realise.

In its recent report on the Aqueduct bid, ECM Libra said video gaming in New York city had proven to be a recession-resistant industry, citing the compounded annual growth rate of 35% in revenues for the industry over the last five years as evidence.

According to AmResearch calculation, the “racino” could increase Genting ’s earnings before interest, tax, depreciation and amortisation (ebitda) by 13% to 18%. The company’s ebitda for the financial year ended Dec 31, 2009 was about RM2bil.

Based on 4,500 slot machines, slot wins of US$250-US$350 per day, and a margin of 20%, the racino could generate ebitda of between US$82mil (RM263mil) and US$115mil (RM368mil) annually, it said.

This means Genting is tapping into a very lucrative market indeed.

“With a two million population catchment, we estimate the project to potentially add 6% to the company’s earnings per share for 2012,” Affin Research wrote in its report.

It added that clinching the racino project would generate an estimated earnings yield of 9%, as opposed to cash in fixed deposit yielding 2% to 3%. Cash-rich Genting has been sitting on a pile of reserves worth a total of RM5.5bil as at the end March 2010, and the company remains debt-free.