Recent events involvingKarambunai Corp Bhd (KCB) are a good example of how rumours can drive up share prices.
Speculation about the development of an integrated resort (IR), which could include a casino, in Karambunai, Sabah, was sparked off last Tuesday. Rumour had it that the project was part of the government’s Economic Transformation Plan (ETP), spearheaded by the Performance Management and Delivery Unit (Pemandu).
Despite many questions, investors bought into the casino story, as the recent run-up in KCB’s share price shows. The loss-making company’s stock reached its highest level in almost two years. It gained more than 200%, rising from 5.5 sen last Tuesday to end at 18 sen last Friday.
However, the excitement will likely die down, after KCB informed Bursa Malaysia last Friday that it had not submitted any official proposal to the Malaysian government, nor had it penned any written documents with any other third parties in respect of any plan to build a casino in Karambunai.
KCB added that it had not received any official communication on the matter from any government source.
The company said a KCB official had taken part in Pemandu’s New Key Economic Areas tourism lab, together with others from the private and public sectors, to identify areas of high-growth tourism potential.
During the sessions, it said, the KCB representative presented drawings of Karambunai and discussed how, as a member of the private sector, the company could assist in achieving Pemandu’s goals. Pemandu then used the plans in the lab as a demonstration of a tourism initiative that could assist it to attain its objectives.
“The recent public information simply mentions the existence of an integrated resort in Kota Kinabalu and has not disclosed and named specifically KCB as a party,” KCB said.
So, at this point there are no concrete plans for an IR in Sabah, and KCB has no plans to take on such a development. Even so, it is puzzling that Pemandu did not come forward with a clarification, especially when the rumour mill went into overdrive.
Be that as it may, even if there were a proposal to develop a casino in Sabah, the possibility of it taking off may be slim given the current political climate.
The Sabah government may want to bear in mind the episode involving Tan Sri Vincent Tan’s sports betting licence under Ascot Sports Sdn Bhd earlier this year.
Ascot’s rationale for legalising sports betting was that it would increase government revenue while reining in illegal bookmaking, estimated to be worth up to RM20 billion a year.
An anti-gambling campaign, run mainly by opposition coalition Pakatan Rakyat, stirred up moral sentiments against sports betting and Ascot was eventually denied its licence.
Thus, the prospects of a casino licence being granted are very slim.
The economic viability of another casino in Malaysia is in itself arguable.
Given that we already have one casino in Peninsular Malaysia, and a couple more in Singapore, wouldn’t it be a case of one casino too many should the Karambunai IR materialise?
It is fair to ask if there is enough demand to support all these casinos. If there is not enough traffic, it would defeat the purpose of building a casino in the first place, which is to bring in more income to the state.
But there are those who say an IR and casino could possibly be one of the best things that could happen to Sabah’s tourism industry. They claim that an integrated resort, outdoor theme parks and casino would significantly boost the local economy.
After all, Sabah has its rich cultural and natural heritage to leverage on. It is home to some of the world’s best diving sites and Southeast Asia’s tallest peak, Mt Kinabalu. In fact, some of the ideas put forward by several Sabah MPs — who had in the past suggested that the federal government give the state a casino licence — drew inspiration from the state’s natural attractions.
Some claim that Sabah has the chance to develop a bigger integrated resort than Resorts World Genting, with outdoor theme parks.
But given the negative public sentiment towards gambling, perhaps the state government would be better off proposing an IR minus the casino.
KCB, meanwhile, may still be in the game if such an IR becomes a reality in Sabah. It owns about 1,500 acres in Karambunai, a peninsula which lies some 27km north of Kota Kinabalu airport.
The company’s flagship asset, the Nexus Resort Karambunai, which consists of a five-star hotel and 18-hole golf course, is located here. KCB’s latest development in the area are the beachfront Nexus Residences Karambunai.
Speculation about the Karambunai IR and casino has certainly driven up KCB’s share price. While KCB has said it has not submitted any official proposal to the government, who knows what will happen going forward.
Observers will be watching closely to see if this issue will be discussed again at the Pemandu open day in Sabah in two weeks’ time, which could shed more light on any possible development.
This article appeared in Corporate page, The Edge Malaysia, Issue 825, Sep 27-Oct 3, 2010