Shares of Genting International and sister firm Star Cruises fell sharply today after the Singapore government said they were not guaranteed a casino licence even if they sign a development agreement this week.

In late afternoon trade, Genting shares were at S$0.760 (US$0.50), down S$0.06 or 7.3 percent from the previous day. Star Cruises shares skidded US$0.040, or 12.9 percent, to US$0.27.

The benchmark Straits Times Index was down 120.08 points, or 3.72 percent, to 3,111.94 in line with sharp falls other regional markets.

Genting and Star Cruises last year won a bid to build an integrated resort that will include a casino on Singapore's Sentosa island. They have pledged to invest US$3.4 billion on the complex.

Since then the Singapore government has sought clarification over a deal which would give Macau gaming tycoon Stanley Ho and a group of investors a 6.99 percent stake in Star Cruises.

In return, Star and Genting International were to get stakes in a new boutique hotel and casino to be operated by Ho's Sociedad de Jogos de Macau.

Deal raises red flag

The pro-government Straits Times has reported that the deal with Ho had "raised a red flag" with Singapore authorities.

A notice to the Singapore Exchange earlier this month said Star Cruises was "reviewing the structure in relation to its investment" in the Macau deal.

In a statement late Tuesday responding to media queries, the Casino Regulation Division of the Ministry of Home Affairs said Genting and Star Cruises are not guaranteed a casino licence even if they sign the development agreement.

"The signing of the development agreement and the issuance of a casino licence are two separate matters," the regulator said.

The two firms - part of the Malaysian conglomerate Genting Group - are to sign on Thursday an agreement to proceed with construction of the project that is to include a Universal Studios theme park and six hotels offering more than 1,800 rooms.

Signing of the development agreement allows the firms to proceed with construction, but "does not automatically qualify" them for a casino licence, the regulator said.

Suitability checks

It said the Ministry of Home Affairs had told Genting-Star it would conduct suitability checks "to ensure that the consortium meets the suitability requirements before the casino licence is issued."

Singapore's Casino Control Act requires that each person associated with the management and operation of the casino be a "person of good repute, having regard to character, honesty and integrity."

In a statement, Genting International PLC said it is working closely with authorities.

"The company, from over 20 years of experience operating casinos in other similar jurisdictions, understands fully the necessity and requirements of thorough suitability checks on casino operators, that this is an on-going process and will continue even after a licence has been issued," it said.

Genting added it is committed to ensuring the project meets suitability requirements.

Similar treatment

A Home Affairs Ministry spokesman told AFP that Las Vegas Sands, which was chosen to build Singapore's other casino on Marina Bay, has also not been issued a casino licence although it started construction of the project this month.

An earlier guideline given by the tourism board to bidders said the operator of the integrated resort can apply for a casino licence only when at least half of the gross floor area has been completed and ready to receive visitors.

At least half of the committed investment must also have been expended.

Macau, a former Portuguese colony near Hong Kong, has overtaken Las Vegas as the world's top gambling destination with earnings of seven billion dollars last year, but it also has a seedy reputation.