Wednesday, May 27, 2009

Lim's Family Sells Stake In Genting Singapore

Genting and Resorts had a nice run for the past two weeks. I did not highlight both companies as buys because I am not convinced that the gaming industry restructuring and pain is over by a mile. But if they want to go up, let them. I do not have a strong case against them except that the Sentosa project cost overruns needs to be detailed out to investors. I did not like the left hand right hand transaction between Lim Kok Thay's private company to the listed vehicle a few months back.

I like the fact that Genting and Resorts are much better off than most of the other gaming giants who have over leveraged substantially. I like the fact that most operators in Macau are bleeding and that Genting/Resorts should be able to profit by moving in as a white knight to secure a foothold in Macau.

The sale, through the family’s vehicles Golden Hope Ltd and Lakewood Sdn Bhd, was aimed at boosting the liquidity of the stock, according to the bookrunners .... eeerrr... Genting Singapore is already very liquid thank you very much, next reason please!!! That's like tricking the ghost to eat taufoo!!! Hmmm... who is the ghost here??

I don't like it when the Lim family's private vehicles start to sell down shares in Genting Singapore. Suffice to say that they think Genting Berhad's 55% stake in Genting Singapore is deemed sufficient, or so they say. As in anything, remember Gamuda's Lin selling his stake substantially, supposedly to facilitate estate planning for his family... well we know what happened to Gamuda after that. Its never a good sign. Chances are that Genting Singapore will have to pile on more borrowings, from Resorts or Genting Berhad as I really think the cost overruns issue has not ended. If it has, please come forward with absolute transparency, how much was budgeted before the project started, what is the variance now, how will that impact the payback period, when can Genting Singapore start paying back dividends? Its looking to be a very very long investment.


Finance Asia: Two investment companies controlled by Malaysia's Lim family were in the market last night attempting to divest their direct 9% stake in Genting Singapore, a Singapore-listed subsidiary of the Genting Berhad group. Genting Singapore is involved in international casino operations and the development of integrated resorts, including a new casino resort on Singapore's Sentosa Island, which is due to open in the first quarter of next year.

The 853.88 million shares were offered in a range between S$0.72 and S$0.76 and late last night the indication was that the price would be fixed at the bottom for a total deal size of S$614.8 million ($425 million). However, the deal wasn't launched until 8.30pm Hong Kong time yesterday and, at the request of a number of Asian investors, sources said the bookrunners had agreed to open the books for a short while before the start of trading this morning to give those who were unable to make an investment decision last night a second chance.

As a result, the terms will not be fixed until this morning. However, the deal was already covered last night and the books included close to 40 accounts. The buyers ranged from specialist gaming investors to long-only Asia funds to deal players who liked the big discount.

The price range corresponded to a discount range of 12.1% to 16.8% versus yesterday's close, which at first glance looks well wide of where most other recent Asian placements have priced. However, the share price has rallied 18.5% over the past three trading sessions, which means investors may have needed the additional incentive to invest at current levels.

There is a lot of positive momentum surrounding the company at the moment however and the share price has more than doubled from the beginning of March when it matched its 2009 low of S$0.415. The company has caught the attention of investors as, contrary to other casino and resorts developers, it is seemingly having no problems to stick to its completion target.

This was confirmed two weeks ago in connection with Genting Singapore's first quarter earnings release, when the management said that it will deliver the Sentosa resort on time and on budget. It also stressed that there is no need to raise more money for this project. This is in sharp contrast to some of its larger rivals like Sands and MGM, which are already laden with debt and have been forced to delay projects because of difficulty in securing the necessary funding. In fact, market talk has it that MGM is looking to sell its 50% stake in MGM Grand Macau and Genting may be a potential buyer.

Aside from Singapore, Genting currently has casino and leisure operations in Australia, the Americas, Malaysia, the Philippines and the UK, but nothing yet in Macau.

Sources say the fact that the Lim family is selling its entire direct stake in Genting Singapore, which it holds through investment companies Golden Hope and Lakewood, isn't a reflection of its views on the company. But with the share price having gone up so much in such a short time, it makes sense for them to monetise part of their holdings. It will also streamline the family's holding in the casino business through one vehicle. The family will still control 55% of Genting Singapore through Malaysia-listed conglomerate Genting Berhad.

J.P. Morgan and UBS acted as joint bookrunners and underwriters for the deal.

p/s photos: Linda Chung Kar Yan


solomon said...

Whatever reasons you term them, when the owner cash out means you better run earlier before you become the ghost who eats the beancurd.

If I am the owner of Genting and I know what am I doing, I may not want to be transparent. Just in case, the market interpret the other way round, I may find my networth gone by a third.

Tony said...

Hmm.. The run up of Genting SP from around 40 cents to 90 cents in such a short time..I wonder if that was orchestrated by inside hands?
Genting SP's British operations are loss making and not expected to turn around any time soon given the state of the British economy. Sentosa? Given the situation in Macau, is Asian gaming still growing at yesteryears rates? Will high rollers switch from Macau to Singapore with their lower taxes on revenue?
Maybe the Lims need the cash to shore up Starcruise which is bleeding seriously.