Towards Financial Freedom
Genting Singapore - Echo to issue new shares BUY
- Echo Entertainment Group Ltd plans to raise A$454mil (S$581.4mil) selling new shares to investors at a discount to reduce debt and expand its high roller programme.
- Investors will be able to buy one share at A$3.30, 23% below Echo's closing price of A$4.2917/share, for every five shares they owned.
- Echo's biggest shareholder Crown Ltd will take up its full entitlement.
- According to previous news reports, Mr Packer and Tan Sri Lim Kok Thay were supposed to meet to discuss on Crown's plans for Echo and Genting's potential entry into Macau. There were no updates on this.
- Based on Genting Singapore PLC's (GenS) estimated shareholding of 33.7mil shares or a 4.9% stake in Echo, GenS would have to fork out A$22.2mil or S$28.5mil for its entitlement of 6.7mil shares.
- We believe that GenS would most likely take up its entitlement.
- We are neutral on GenS' investment in Echo. As GenS' stake is only 4.9%, Echo's contribution would only come in the form of dividends.
- As mentioned in our previous report, any hostile takeover of Echo would be messy. It would cost GenS almost A$3.5bil or S$4.5bil to acquire Echo completely based on a share price of A$5.39, which is roughly 25% higher than the closing price.
- As Echo is currently undergoing a debt restructuring programme, we reckon that it is unlikely that Crown or GenS would be making any takeover moves.
- We maintain a BUY on GenS as the completion of the Western Zone in 2HFY12 would underpin its profit growth. Its market share of the VIP business in Singapore is also improving.
Source: AmeSecurities
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