No Reasons To Hang On GENM

Gotten rid of my GenM at RM2.99, can't wait for the pathetic 3.6sen dividend. :(

The disposal will allow me to unlock more money standing by for next purchase. Really disappointed with GenM though with the shares buy back activities, price still retreated. Of the two investment between GenM and GSP, GSP give the most capital appreciation for me even though the two investments were almost bought at the same time. Today GSP closed at S$1.81, my gain is almost 160%, comparatively with GenM only garnered a mere overall 6.6% gain. :( What a big different !!!

GenM's long awaited special dividend was in vain, price appreciation is slow, shares buyback unable to leap big gain. I don't know what else to hope for ?? Money was waste big time doing RRPT and their investment would likely hard and long before an actual result would be seen probably after few years time. I see no reasons for me to keep any longer, maybe an obvious improve earnings will spike my interest again in near future. 

GENM - An Expected Dividend

BINGO !!! As expected, GENM only declare 3.6sen dividend as what i was predicted earlier. The profit also expected to be stable where it registered RM305million on this 2nd Q. Consolation is that, a 0.6sen dividend higher to its corrsponding Q. Hokkien people say "No fish, shrimp also can lah"....

GENM qtrly report here.

3.6sen dividend represent about RM200millions, which mean there is about RM100millions left over in retain earnings. Lets work out the final cash balance for GENM.

Est. cash balance after covering all it acquisition, shares buyback and licenses here = RM1.12billions

Add this Q profit after minus dividend = 1.12b + 100m = RM 1.22billions.

GENM still have approximately RM1.22billions to be squandered away.

What do you think GENM will do next ????

Whats Next For GenM After EGM ?

Below, Genm announcement, as expected, shareholders gave its approval to acquire UK casino. A plus for GSP and a minus for Genm.

Announcement Details :

We refer to the Initial Announcement and the announcement dated 9 August 2010, both in relation to the above.

On behalf of GENM’s Board of Directors, we wish to announce that GENM’s shareholders have approved the resolution in relation to the Proposed Acquisition, as set out in the Notice of EGM dated 9 August 2010, at GENM's EGM held today.

Whats next for Genm ? More RRPT ? Lets work out the remaining cash for GENM :-

TOTAL CASH about RM5.2billions

1) Based on the Company’s issued and paid-up share capital of 5,907,059,648 ordinary shares as at 18 August 2010, and after taking into account the cumulative net outstanding treasury shares to-date of 214,501,100 (representing approximately 3.63% of the issued and paid-up share capital), the Company intends to purchase up to a further 376,204,865 of its shares (representing approximately 6.37% of the issued and paid-up share capital) within the next 10 months.

2) On 3 August 2010, New York Lottery announced that its evaluation committee has unanimously recommended to the New York Governor that Genting NY be awarded the New York video lottery licence for the Project. Genting NY’s proposal included US$380 million as an upfront licencing fee.

• Item 1 of shares buyback of 376millions shares, this may cost approximately, 376mil x RM3.10 = RM1.2billions
• Item 2 will cost approx. US$380 x RM3.2 = RM1.2billions
• Acquire UK casino = RM1.68billions

 
Est. Cash balance remain = 5.2 - 1.2 - 1.2 - 1.68 = RM1.12billions
 
Est. coming Q to be announced on 26/8/2010 & net profit approx. = RM270millions
 
Est. total cash balance = RM1.12b + RM270m = RM1.39billions
 
Will there be special dividend for this Q ????
 
Lets work out :-
 
Share Issued = 5.9billions
 
Maximum afforded dividend for this Q = 1.39/5.9 = 23sen per share
 
Let's chop dividend by half = 23/2 = 11sen per share
 

11sen per share dividend for this Q is possible but based on track records and the possibility to retain more cash for development and enrichment works for item 2 and UK casino. So, cut this by another half = 11/2 = 5.5sen.

 

My final figure of dividend for this Q could be around 3sen to 5sen. Special dividend ???? big fat hope again.

Spotlight on Genting EGM

Some analysts pessimistic about UK casino purchase due to challenging operating environment

 

PETALING JAYA: While the investing community may now be re-looking at Genting Malaysia Bhd due to its new flavour as an international play, just earlier this year this casino operator did not have a compelling story to tell.

Sure, profits were decent and it was sitting on a cash pile of some RM5bil, but that cash hoard was becoming more of a hurdle as all that money wasn’t doing anything.

 

Then came the announcement in early July that Genting Malaysia was setting its sights on its United Kingdom (UK) casino operations following the proposed acquisition of four casinos from Genting Singapore plc.

 

Analysts and shareholders kicked up a fuss, with what was seen as a clear-cut related party transaction.

 

Genting Malaysia announced that it was proposing to acquire Genting Singapore’s UK casino operations for £340mil (about RM1.67bil). Genting Singapore first bought Genting UK in 2006 at £626.91mil (RM3.13bil)

 

The UK casino operations comprise four companies – Nedby Ltd, Palomino Star Ltd, Palomino World Ltd and Genting International Enterprises (Singapore) Pte Ltd – collectively known as Genting UK.

 

Gambling in the UK is regulated by the Gambling Commission on behalf of the government’s Department for Culture, Media and Sport under the Gambling Act 2005.

 

There have been significant updates to UK’s gambling laws, including increasing tax on poker profits from 15% to as high as 50% depending on profitability. There have also been increased rates on all categories of amusement machine licence duty.

 

These measures are likely to continue to dampen the gaming enviroment in the UK and some analysts are pessimistic because of the challenging operating environment.

 

There are concerns that Genting Malaysia could be buying Genting UK at a time when the economy is not only weak, but faces a double whammy of the casino industry facing tough legislation.

 

Hence, all eyes will be on Genting Malaysia’s EGM tomorrow to approve the acquisition of Genting UK from Genting Singapore Plc Genting Malaysia’s second quarter results to June 30, will be also released on Aug 26.

 

Genting Malaysia has been on a roadshow in the last few weeks to meet up with its shareholders and to explain the rationale and potentential of buying into the UK casino operations.

 

Last week at Genting Singapore’s EGM, the resolution in respect of the sale of UK casino assets to Genting Malaysia passed by shareholders.

 

It is however interesting to note that over the last two days, Genting Malaysia has bought back a total of 11.2 million shares at an average price of RM3.03. This brings its cumulative treasury shares held at 3.71%.

 

The group has announced its intention to purchase up to a further 376 million shares (representing 6.4% of share cap) within the next 10 months.

 

Meanwhile last week, Genting Malaysia Bhd obtained all the necessary approvals and signed the agreement to develop the Aqueduct New York racino.

 

Genting New York is expected to invest US$1.3bil which consist of US$380mil (RM1.22bil) of licencing fee, US$350mil (RM1.12bil) initial capital expenditure (4,500 video lottery terminals), and US$650mil (RM2.08bil) to build three hotels of differing standards, shopping, recreation, spa and other resort facilities.

 

Dubbed Resorts World New York, the proposed three-storey facility will also contain several restaurants, water features, an outdoor terrace connected to the Aqueduct racetrack which will be able to accommodate up to 10,000 people and a 2,200-bay car park.

 

Genting New York aims to complete the entire development within 12 months from the date it obtains formal approval from the state to proceed.

 

As part of a wider development plan, Genting New York is also proposing to build three hotels of differing standards, shopping, recreation, spa and other resort facilities at a total cost of US$650mil (RM2.09bil). That will take the proposed outlay for the entire project to over US$1.3bil.

 

“If we assume daily win per terminal of US$300 (similar to the more successful Yonkers racino closer to New York city centre), Resorts World New York may contribute RM595mil and RM196mil to Genting Malaysia’s revenue and profit after tax respectively by 2013,” said an analyst from HwangDBS Research.

 

UOBKayHian reckons that the project is neutral to Genting Malaysia’s revised net asset value but is slightly earnings-accretive over the long term, assuming that the Aqueduct would be eventually given a license to operate table games.

 

The research house estimates the slot facility could provide a payback period of 5.5 years (on full expansion), while the payback period for the rest of the facilities could be significantly longer.

“Conservatively, Aqueduct could pull in revenue and operating profit of US$468mil and US$84mil respectively when it is fully expanded.

“This accounts for about 14% of Genting Malaysia’s forecasted 2012 operating profit,” said the research house.

The recent spotlight on the entire Genting group has been brought about by Genting Singapore’s sterling results and the re-rating of casino sector in Singapore. Genting Singapore is 52% owned by Genting Bhd.

Genting Singapore’s second-quarter results took the investing community by surprise, when it beat analysts and consensus estimates.

For the second quarter ended June 30, Genting Singapore posted a net profit of S$396.5mil (RM925.9mil) compared with a net loss of S$50.7mil a year earlier.

Revenue soared to S$979.3mil from S$120.1mil previously. This translated to a profit margin of about 40%.

D-Day for GenM on Tuesday

KUALA LUMPUR: Since the passing of Tan Sri Lim Goh Tong, the late founder of the Genting group, his son and successor Genting Bhd chairman and CEO Tan Sri Lim Kok Thay’s tenure has been marked by an internationalisation of the group.

In an age of globalisation, this internationalisation strategy has taken the Malaysian gaming giant to spread its wings from its comfortable casino base on the lofty peaks of Genting Highlands, Malaysia to the UK, Singapore and soon, the US.

 

After acquiring the UK casino assets in 2006, the group went on to open the high-profile Resorts World Sentosa integrated resort in Singapore on Feb 14 this year, and is now bidding for a racetrack casino in New York City.

 

One of the direct effects of this globalisation drive on equity investors is the key decision that has to be made by minority shareholders of Genting Malaysia Bhd in an EGM on Tuesday.

 

At the EGM, they will decide whether or not to approve Genting Malaysia’s proposed purchase of the UK casino operations from Genting Singapore plc.

 

Genting Singapore shareholders had approved the proposal at an EGM on Wednesday. The deal is set to cost Genting Malaysia £340 million (RM1.68 billion) for the assets that include 44 gaming licences in the UK as well as various properties.

 

Genting Malaysia’s major shareholder Genting Bhd and the parent group’s chairman and CEO, Kok Thay (who also holds a direct 0.28% stake in Genting Malaysia) would not be voting at the Genting Malaysia EGM.

 

Since they are deemed interested parties in the transaction, they would abstain from voting in accordance with stock exchange regulations. The decision thus rests on the larger minority shareholders which, for Genting Malaysia, means some pretty high-powered foreign institutional investors.

 

The top five such minority shareholders are International Value Advisers LLC (2.48%), Vanguard Group Inc (1.38%), Blackrock Fund Advisors (1.27%), Wintergreen Advisers LLC (0.78%) and First Pacific Advisors Inc (0.72%).

 

However, a look at Genting Singapore’s list of minority shareholders also shows some of the same names, such as Blackrock Fund Advisors (0.9%) and Vanguard Group (0.3%), among others.

 

Among the smaller minority shareholders, Fidelity Management & Research holds 0.04% in Genting Singapore and 0.17% in Genting Malaysia; while Credit Suisse Asset Management holds 0.02% in Genting Singapore and 0.14% in Genting Malaysia.

 

The UK casino operations to be transferred are housed under Nedby Ltd, Palomino Star Ltd, Palomino World Ltd and Genting International Enterprises (Singapore) Pte Ltd.

 

Critics have voiced that it is yet another related-party transaction within the gaming group. They also lament that the deal does not create much value for the Malaysian arm and will deplete its cash pile.

 

The knee-jerk market reaction then was to bid down Genting Malaysia’s share price, which fell 12 sen to RM2.62 on July 2, a day after the proposal was first announced. Conversely, Genting Singapore’s share price rose as investors there welcomed the sale.

 

However, Genting Malaysia’s share price has bounced back sharply over the last week, gaining 12% in the past five trading days alone. The stock closed at RM3.07 yesterday, up 3 sen or 1%.

 

UK casinos seen as unexciting for Genting Malaysia

An analyst at a large brokerage-backed research house said on both a price-to-earnings ratio (PER) and enterprise value-to-Ebitda (EV/Ebitda) basis, the UK casino operations looked more expensive than Genting Malaysia’s total business.

 

Acquiring the UK casino operations would bring down Genting Malaysia’s overall valuation numbers, he said.

 

In the letter to minority shareholders dated Aug 9, RHB Investment Bank Bhd (RHB IB), the independent adviser for the proposal, said at market close on Aug 2 and based on consensus estimated FY2011 earnings, Genting Malaysia had an EV/Ebitda of 6.1 times and a PER of 12.9 times.

 

Based on the purchase price of £340 million, the valuation for the UK casino operations on EV/Ebitda basis was 11.2 times, with a PER of 25 times, according to the report.

 

Some analysts also said for the medium term, not much growth would be expected for the UK casino market.

 

Two analysts that The Edge Financial Daily spoke to said separately that among the major dampeners to growth was a smoking ban in enclosed public places that came into effect on July 1, 2007 across the UK. This has been blamed by the industry for reducing revenue.

 

At the same time, growth would be hurt by the uncertain outlook of the UK economy over the next several years, a two-year civil servants pay freeze expected to last well into 2012, and the value-added tax (equivalent to the proposed GST in Malaysia) that has returned to 17.5% effective Jan 1 this year from a temporary reduction to 15% on Dec 1, 2008.

 

Nonetheless, RHB IB recommended shareholders to vote in favour of the proposal.

 

Relating to the EV/Ebitda valuation, the independent adviser said: “Although the implied 2011 EV/Ebitda is above the average EV/Ebitda multiples of comparable companies, we do take into consideration that the proposed acquisition involves the acquisition of a controlling stake in the acquiree group.”

 

RHB IB had calculated an average EV/Ebitda of 9.3 times and an average PER of 19.8 times on a list of 15 comparable companies.

 

The adviser added: “We note that the purchase consideration is fair as the EV/Ebitda multiple implied by the purchase consideration for the proposed acquisition of 11.2 times is within the average EV/Ebitda multiple of comparable listed companies after applying a 20% to 30% control premium of between 11.2 and 12.1 times.”

 

According to an industry source, one reason for the transaction is that the UK casino business is a better fit for Genting Malaysia, while Genting Singapore is focused on getting up to speed and watching the competition with the Las Vegas Sands group that owns the Marina Bay Sands casino.

 

Genting Malaysia’s casino business is a likely better fit for the UK casino landscape in terms of clientele and type of operations, as compared with the integrated resort-style Genting Singapore operations.

 

Moreover, Genting’s entry into the UK casino market was initially based on the premise that the UK government would be liberalising the industry and would allow the construction of similar Las Vegas-style “super casinos” as promised by the administration of former prime minister Tony Blair.

 

However, the idea did not materialise under the Gordon Brown leadership, the industry source added.

 

Tuesday EGM ‘a tougher sell’

The proposed sale of the UK casinos to Genting Malaysia will make Genting Singapore a pure integrated resort play, and strengthen its balance sheet to face competition from Marina Bay Sands and other regional casinos.

 

With the proliferation of new casinos across Asia and the aggressive branding and expansion of Macau as the region’s premier gaming destination, Resorts World Sentosa will need to constantly reinvest and upgrade itself to attract more regional gamblers and high-rollers.

 

Resorts World Singapore will thus face an increasingly competitive environment, to which its Universal Studios theme park — the only one in Southeast Asia — is a big added attraction for the integrated resort.

 

This is much unlike the casino operations in Resorts World Genting, which operates as a monopoly, and caters more to the local crowd with less reinvestment needed.

 

How minority shareholders in Genting Malaysia will decide on Tuesday remains to be seen, but the approval in Malaysia “is a tougher sell” compared to Singapore, said an observer.

 

That key decision could well decide how the wider Genting group plans the next step of its internationalisation strategy.

GENM A Pinocchio Formation ??

Finally, GENM starts to move and break the RM3 barriers. :) But many TA would think this is not convincingly enough to break above RM3 as it last closed at RM2.99. In technical term this might called a pinocchio bar or in short pin bar as GENM rammed up to RM3.11 before settling down at RM2.99. Gosh, so volatile. !!

Even so, this has not confirmed as pin bar as yet, cause, a confirmation of pin bar would depend on the third bar which mean this would need to depend on tomorrow bar forming, if the third bar makes the pin bar sticks out noticeably in between, then we can confirmed it is a bearish reversal pin bar formation. wow !! talking technical here. ha ha ha ha

Am sure you guy heard a lot of this, if the breakout not convincingly break through, further down side would be expected. walau er..... i am just another technical expert here. aikse man. Don't mean to teach technical here. In fact long term guy like me don't depend on technical as these kind of stuff would not apply to long term investment. :)

In short, i have sold some GENM out at RM3.05 today. Reason is simple, because i don't believe GENM will ever give special dividend anymore. They are talking about spending few hundred millions for RRPT for buying UK casinos from GENSP. So, what is that more to expect for special dividend so to speak. This trend up is an opportunity i believe and it make way for me to look at GENSP instead. So, seize the day if you can. Till then happy trading.

Genting Malaysia

· The Case Against The Acquisition

· The Case For The Acquistion

Genting Malaysia Bhd (GenM) is acquiring Genting Singapore PLC’s casino operations in the UK (Genting UK) for £340 million (RM1.67 billion) cash.

Genting UK’s operations consist of four companies — Nedby Ltd, Palomino Star Ltd, Palomino World Ltd and Genting International Enterprises (Singapore) Pte Ltd. The acquisition was in line with its strategy to grow its core businesses of leisure, hospitality and entertainment internationally, beyond Malaysia.

Genting UK’s operations have the largest number of casino properties in the UK with 44 casino properties, including five located in London. They come with established gaming brands such as Crockfords, Colony Club, Maxims, Circus, The Palm Beach and Mint.

As at Dec 31, 2009, the four companies had a total revenue of £194.1 million and a net profit of £6.7 million. This means, at the acquisition price of £340 million, the transaction is priced at a historical price-to-earnings ratio (PER) of 51 times. The four companies had collective net assets of £288.9 million as at March 31, 2010, implying an acquisition price-to-book ratio of 1.2 times.

Genting rises on 'overweight' call

Company news really drive people crazy, a minute was rated "SELL" and the next minute can turn 180 degree to 'OverWeight". What can you expect from this overnight turn ?? Up or down ?? One suggestion from me, don't bother. What the hack, just keep till the cow come home........toto, hng,  & KC are you all agree ??

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Genting Malaysia Bhd, the country’s sole casino operator, rose the most in three weeks in Kuala Lumpur trading after Morgan Stanley initiated coverage of the stock with an “overweight” call and RM3.05 share forecast.

The stock rose 1.1 per cent to RM2.69 at 9:05 a.m. local time, set for its biggest gain since June 18. -- Bloomberg

Market Snippets

Genting Malaysia sole surviving bid for NYC racino project

The company is the sole surviving bidder for the license todevelop and operate a video lottery facility in NYC’s Aqueduct project following the disqualification of 2 otherproposals.

Kencana wins RM201m job

Kencana said it won a contract worth RM201m from Newfield Peninsula Malaysia Inc. The contract is one-off in nature and is expected to contribute positively to the company’s earnings for the next 2 financial years (ending July).

Buyout offer for M3nergy extended

The takeover offer for M3nergy has been extended again from 25 June to 3 Aug. Adamus Avenue is seeking to take the company private for RM1.85/share.

MTD ACPI land sale for RM8.23m

The company announced that it had entered into a SPA to dispose of a 1.39ha piece of freehold land zoned for commercial development in Sepang for RM8.23m. The company will realize a net gain of RM1.33m from the sale.

Axiata announced new appointments

Axiata announced the appointment of Donald James Rae as its new SVP for Group Business Development. Donald James Rae has had 20 years of experience in telecommunications. Axiata also appointed Eric Chong, as Hello Axiata’s Chief Marketing Officer and Suresh Sidhu as Sri Lanka’s Chief Officer.

 

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

A PRO For GenSP but A CON For GenM

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.

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.

What Can i hope from GENM ?

Wedding Gifts, Favours, Bells said...

wat do u think of GENM... how much holdings they had in genting sp? GENM not moving at all... hovering between 2.70-3.00 for very long time liao...

January 19, 2010 3:36:00 AM GMT+08:00

Horse said...

Wedding Gifts,

GENM has been underperformed & it current valuation stood abt 13X PE which is far from 17X PE. I believe soon they will do a catch up. Strong cash flow & stable earning, i hope for a special div coming Feb 2010 since they got ton of cash but usually a fat hope. :(

Many avoiding this guy as there is competitive risk from Resorts Singapore where business might be affected.

Secondly, is the RPTs recently where Genting try to get cash out from GENM.

Thirdly, is the long waited special div never come to reality to unlock cash reserves that cause many disappointment including me. :(

Anyway im still keeping & hope for a turn around.

January 19, 2010 10:03:00 AM GMT+08:00

-------------------------------------------------------------------------------------------------------------

I personally feel that GENM is a super laggard & underperformed stock, if one were to trading within the range, it will surely make a lot from this. Furthermore, buying anything at this range should be quite safe, the down side is limited but the up side is quite promising. Assuming the below valuation :-

Net profit for 3Q for year ending 2009 stood at = RM965m

Total EPS for all 3Q = 16.89sen



Assuming,

Expected Net profit for 4Q 2009 to be announced Feb2010 is = RM357m basing on 27% profit of it previous 4Q’s revenue

FY 09 profit = 965 + 357 = RM1.3b

EPS for 4Q = 6.05sen



Total EPS for all 4Q for year ending 2009 = 16.89 + 6.05 = 22.94sen

PE = 2.86/22.94 = 12.47sen



Fair value (basing valuation of 15X FY10 PE) = RM3.44

Did you see the FV !! Couple with GENM net cash pile approximately RM5b there which is continuing to grow, this represent about 0.85sen per share to be given away if they decide to but as I said earlier this is fat hope. If we just lump this amount into the valuation basing on current PE 12.47sen, so just whack the figure in (RM2.86 + 0.85) will give us RM3.71. Wow, see what I get here….!! With such solid cash backing, at current price (RM2.86) should be worth looking. I would expect or hope for a higher dividend payout announcement in the coming 4Q result at least if a special dividend is far too much.

Genting Malaysia Bhd (Price: RM2.79  ACCUMULATE  TARGET: RM3.30)

Pending for a breakout

Business Background

 Genting Malaysia (GENM) is one of the leading leisure and hospitality corporations in the world. Listed on Bursa Malaysia
with a market capitalization in excess of RM 16bn, it owns and operates Genting Highlands Resort (GHR), a premier
leisure and entertainment resort in Malaysia.

 GHR has 6 hotels with a total of 10,000 rooms, theme parks with over 60 fun rides and attractions, 170 dining and retail
outlets, as well international shows and business convention facilities. It was voted the World Leading Casino Resort
(2005, 2007 and 2008) and Asia’s Leading Casino Resort for four successive years (2005-2008) by World Travel Awards.
The Resort received 19.2m visitors in 2008, of which 27% were hotel guests and 73% were day-trippers.
Outlook & Comments

 A laggard in the KLCI rally. GENM share prices have underperformed the KLCI by 2.7% in 1-month, 13.4% in 3-month
and 11.8% in 6-month, respectively. We believe the discounts are mainly attributable to: 1) investors’ concern on the
potential competitive risk emanating from the Singapore integrated resort, 2) disappointment on the group’s inability to
unlock the value of its cash reserves, 3) fears of another related party transaction.

 Current valuations have more than priced in the negative news. GENM’s valuations of 13.6x FY10 PE and 12.9 FY11
PE are cheap against its 2-year historical average 17x PE as well as its regional peers which trade at an average of 43.5x
FY10 PE and 20.5x FY11 PE. If stripping out its net cash/share of 86sen, the stock is only trading at 9.4 FY10 PE and 8.9
FY11 PE.

 Ready for a valuation catch-up: As we head into 2010, we expect investors to shift focus from liquid index-linked stocks
that have significantly outperformed FBM KLCI to laggards such as GENM. Apart from being a natural beneficiary of
improving local consumer spending, GENM's attractive valuations, liquidity and price’s under-performance (relative to
KLCI) are likely to draw interest from those investors who are looking for rotational play.

Valuation and recommendation

 Visible earning and strong cash flow. We believe GENM’s wide valuations gap against its regional peers will narrow
given GENM’s stable earnings visibility and solid balance sheet. Based on Bloomberg estimates, GENM is expected to
record an average RM1.24bn PAT for FY 09-11 while having a RM5.9bn cash pile which is continuing to grow.

 RNAV at RM3.28/share Based on a 14xPE to FY10 PAT,GENM’s operations are worth approximately RM2.28/share while
based on Star Cruises’ closing price of HK$1.68per share, GENM’s 19.3% stake is worth RM0.18/share. Applying a 20%
discount to the above valuation while adding the net cash of RM0.86/share shall give us a RNAV of RM3.28/share.

 Based on the RM3.28 RNAV/share, GENM is trading at 15.1x FY11 PE, which is about 11% discount to its 2-year historical
average 17x and 26% discount to peers average of 20.5x.

 Accumulate around RM2.70-2.75. GENM’s share price has been hovering around the RM2.60-3.00 level for the past 5
months and was unable to break the downtrend line (DTL) which started from the RM4.60 peak in July 07. For the uptrend
to commence, it is crucial for GENM to consolidate above the 150-day SMA around RM2.70. The next critical support is
RM2.62 (76.4% FR from RM2.49-3.02).

 Technically, the momentum and trend indicators are gradually bottoming up. A breakout above DTL, which currently stands
at RM2.78 will drive prices higher to RM2.82 (38.2% FR), RM2.89 (23.6%FR) and YTD high at RM3.02. A tougher
resistance level is RM3.30.

Current price 2.79
Upside 17.7%

OSK Research maintains Buy on Genting Malaysia

KUALA LUPUR: OSK Investment Research is maintaining its Buy on Genting Malaysia (formerly Resorts World) with a target price of RM3.25 (10% discount to realized net asset value of RM3.60).On Wednesday, its unit Resorts World Ltd, had subscribed to Wynn Las Vegas LLC and Wynn Las Vegas Capital Corp mortgage notesamounting to US$15 million (RM50.5 million). The notes yield an annual return of 7.9% and mature in 2017. The Notes are secured on substantially all of the existing and future assets of the issuer.OSK Research said the acquisition represented a minute 1.1% of the group's net cash balance of RM4.6 billion and only 3% of the total subscription offering of US$500 million by Wynn."We believe that the market may start questioning the strategic reasons for investments of such small scale despite its potential to generate higher returns than the risk-free 2% that the group currently earns on its cash hoard," it said.The incremental impact on group earnings from the RM50.5 million investment would amount to approximately RM2.9 million, or less than 0.2% of the group's FY09 earnings.Given that Resorts remains the key cash flow generating company within the group coupled with its net cash hoard of RM4.5 billion, OSK Research said it continued to believe that it will remain the group's preferred casino M&A vehicle. In relation to potential acquisition opportunities in Macau, Singapore's strict casino licensing oversight may pose a hindrance to Genting Singapore. The stock's current undemanding valuations of 5.7 times FY10 enterprise value/ earnings before interest, tax, depreciation and amortisation (EV/EBITDA) versus its historical average of 7 times and the regional peer average of 7 times to 10 times, indicates that the potential competitive risk emanating from the Singapore integrated resort has largely been priced in. "Stripping out its net cash/share of 90 sen, the stock trades at 8.9x FY10 PER. Maintain BUY with a target price of RM3.25 (10% discount to RNAV of RM3.60)."