What an act from Genting Malaysia !!?? Many view it a negative proposed acquisition to Genting UK by GenM but an all positive for GenSP no matter how you view it. GenM a net cash rich reserved company with approximately RM5.2b cash soon will see big chunk of this go to GenSP through another so call "RRPT" !! wow, this is not the first case and believe that more to come. The previous RRPT was the acquisition of Walker Digital Gaming from Genting Group which saw a RM250mil "invested" or better know as "free bank loan" to Genting Group. This time round a bigger chunk of RM1.6bil "free bank loan" is given to GenSP. Hello, Tan Sri LKT this is so call "Good Corporate Governance" ?? What shareholder or investor's preference is for a better utilisation of GenM RM5.2bil cash reserve NOT through RRPT. What's good does it bring to GenM shareholder by engaging RRPTs to only benefit one party ?? Not sure how to better utilising it ? better off by investing in strong growth potential business opportunity company not low level of profitability or losing company like Genting UK else return it back to shareholders by declaring higher dividend or capital return......
More CON for GenM:-
1) Genting UK casino is a low profit business, minimal profit contribution of only 6.6mil pound in FY09. Subject to a hefty 50% tax bracket.
2) Net cash shrink by 32% to RM3.6bil after RRPT. An inefficient use of resources.
3) Acquisition is pricey, a RM1.67bil may result further impairments.
4) There is a high probability of further capital injection as Genting UK may be at a heavy capex stage.
5) Intense competition in British market.
6) Low Growth catalyst.
7) Special dividend is no way to be seen, likely to weigh down on its share price performance.
7) Special dividend is no way to be seen, likely to weigh down on its share price performance.
PRO for GenM:-
1) Assuming earnings surge in UK casino operation, economy recover and lifting asset but is a long haul of minimum 5 years and above.
2) Assuming tax bracket reduce by half. Regulatory change in Britain.
2 comments:
I tend to worry about investing in a company with cash way exceeding that for working capital requirement. The people in-charge will do all kinds of funny things and soon you find those cash disappears through not-on-arm's- length and even fictitious rpt, through meaningless and costly mergers and acquisitons resulting the winners' curse etc. Without any positive net present value projects to invest in, cash should be return to shareholders in the form of special dividends, or used for share repurchases. However, minor shareholders can only hope but at the end, they will end up with holes full of soap.
sold some of my gensp at 1.15.
KC, what to do, we can't have both side of the world, so got to sacrify one of it. Genm is meant for sacrifising due to it cash pile. :(
Post a Comment