Tuesday, July 6, 2010

Genting clarifies RM1.66bil casino plan

PETALING JAYA: Genting Malaysia Bhd yesterday replied to Bursa Malaysia queries on the proposed acquisition of the casino businesses in Britain from sister company Genting Singapore plc for £340mil (RM1.66bil).

Genting Malaysia said that as at June 30, the total outstanding advances owed by the acquiree group (Britain casino business) to Genting Singapore plc was about £336,457.

Such outstanding advances owed by the acquiree group would be settled and/or waived prior to the completion of the proposed acquisition, it said.

It also said JPMorgan Securities (Malaysia) Sdn Bhd had based its valuation of the equity value of the acquiree group on a variety of intrinsic and public-market based methodologies, which included conducting a discounted cashflow valuation and an analysis on trading comparables.

The valuation of equity value was between £310mil and £370mil.

In arriving at the said valuation, JP Morgan had also, among others, reviewed certain publicly available business and financial information concerning the acquiree group and the industries in which they operate.

Bursa has asked Genting Malaysia to furnish it with the total amount of outstanding advances owed by the acquiree companies to Genting Singapore as at the latest date.

It also wanted to be informed of the salient features of the valuation of the equity value of the acquiree group as conducted by JPMorgan Securities (Malaysia) .

The plan, a third-party transaction, has drawn its fair share of criticism from analysts who said the investment was pricey for a risky market, provided little growth catalyst and may require more capital injection in the future

2 comments:

Anonymous said...

BJToto was sold down quite significantly over the past few days due to the increase in the gaming duties from 6% to 8% w.e.f. July 1. The increased duties will affect pure gaming operator such as BJToto- an impact of 6-8% according to Kenanga Investment Bank.

However, BJToto is in the process of raising RM800 million via a medium term note programme (MTN). It explained that the proceed would be used to refinance existing bank borrowings and for working capital. BJToto has a net gearing of 0.4 time as per its accounts for QE31/4/2010 (total borrowings of RM450 million less cash & bank balances of RM257 million). Assuming that it refinanced the entire amount of its bank borrowings of RM450 million, the balance of the MTN programme of RM350 million is still available for "working capital". An on-going gaming operator is hardly the kind of business that requires such a large sum of money for working capital. In fact, its existing operation generated cash flow of RM451 million for FY2010 & RM489 million for FY2009. Why is BJToto raising such a large sum of money?

There are two possible reasons for this fund-raising activities:
1. To finance the start-up capital for its 20%-owned associate, Berjaya Lottery Vietnam Ltd; or
2. To effect a large special dividend payout to its shareholders. In FY2010 & FY2009, BJToto paid dividend totaling RM433 million & RM241 million, respectively.

I believe the second scenario is a more likely reason for the MTN programme. This is because its parent company, Berjaya Land Bhd ('BJLand') has a large convertible bond due for redemption in August 2011. The outstanding sum is about RM711 million. BJLand, which owned 51% of BJToto, must be counting on a larger dividend payout from BJToto to ease its cash flow requirement. With the possible available fund of RM350 million from the MTN programme, BJToto could announce a special dividend of 25 sen on top of its normal dividend payout of about 30 sen. If this materialized, BJLand may receive RM379 million dividend from BJToto. Minority shareholders could possibly receive dividend totaling 55 sen for the next financial year.

horse said...

hope that the special div is what it turns out to be, then d upside is imminent for bjtoto.

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