NEWS ANALYSIS

Speculation abounds that approval may already have been obtained, reports VEN SREENIVASAN

The prospect of a casino, set amid white sandy beaches facing the South China Sea, has propelled the stock price of Gallant Venture to new heights in recent weeks.

After rising by about 75 per cent over the past month, the stock has pulled back slightly on Friday to 72.5 cents in tandem with the broader market. But many analysts and brokers here seem to think that it has at least a 30 per cent upside from current levels.

Kim Eng has a price target of $1.02 on the stock, while OCBC sees the stock rising to 88 cents. Is the euphoria justified?

So far, it has been a good performance for a Sesdaq debutant which opened trading 40 per cent below its 50 cent issue price on June 6, and thus gaining the notoriety of displaying one of the worst openings for an initial public offering (IPO) in years.

Gallant - which is jointly owned by Indonesia's Salim Group (40 per cent), SembCorp Industries (27 per cent) with the rest in the hands of Ascendas and UOB - is the biggest landowner, industrial park operator and utilities provider on Indonesia's Batam and Bintan islands.

The jewel in its crown is its 14,400 hectare Lagoi Bay white sands beachfront property strip it controls on the northern part of Bintan island, just west of the existing Bintan resorts. The property, which is one-third the size of Singapore, is carried in Gallant's books at $3 per square metre (psm) or 28 cents per square foot (psf), which works out to a total of about $541 million.

Eugene Park, Gallant's director and CEO told BT in June that his company intended to initially develop about 10 per cent of this land at the Lagoi Bay area, which is framed by 5km of beaches.

'It is ideal for world-class resorts, high end-villas and niche developments,' he said, and added that the plan also includes developing Bintan into a second bustling Bali by building a township and resettling some of the residents and shopowners from the southern part of the island there.

But the bigger story captivating the market, and boosting Gallant's stock price, is the prospect of a casino.

There has been market speculation that parties associated with the company may already have obtained in-principle approval from the Riau authorities to house at least one casino in the Lagoi Bay area.

But in reality, the big hurdle will be getting Jakarta's approval. The Indonesian Parliament currently has a blanket ban on casinos anywhere on the archipelago.

Nevertheless, the casino story got a big leg-up when BT reported earlier last week that Gallant may team up with a new unit of Malaysia's Genting group for just such a project in Bintan.

The parties said to be involved in the initiative are Malaysian businessman Mark Wee Liang Yee and Kuala Lumpur-listed Landmarks, in which Genting has coincidentally emerged as a surprise stakeholder with a purchase of a 17 per cent share.

But Landmarks itself has denied it is in talks to build a casino on Bintan. That still leaves Genting, which has maintained a deafening silence so far on the Bintan casino subject. Meanwhile, the owner of the region's only casino is currently preoccupied with its bid for the Sentosa IR in partnership with Universal Studios.

Gallant's Mr Park believes that the two Singapore IRs would provide a strong demand for a third player close by and set amid the white sandy beaches of Bintan.

That is, if the Indonesian government allows such a project.