Towards Financial Freedom
Genting Singapore - Walking Away From Echo
THE BUZZ
Genting Singapore announced that it has disposed of its entire 4.8% stake in Echo Entertainment Group Ltd via an agreement with Citigroup Global Markets Australia, which will fully underwrite the disposal. The group stated that the disposal is a part of the rationalisation of its investment portfolio
OUR TAKE
No material impact. As the disposal price of AUD3.99/share is relatively close to the group's average cost of acquisition of AUD4.15/share, the sale will likely give rise to a marginal loss on disposal amounting to about SGD9m (a 1.2% impact on our FY12 earnings forecast). As such, our sum-of-parts (SOP) FV of SGD1.20 remains largely unchanged, as the difference in the ultimate disposal price of AUD3.99 and our marked to market value of AUD4.28/share represents a marginal downward adjustment of SGD14m, or SGD0.01sen/share.
Mainly an opportunistic investment. Contrary to earlier expectations of Genting Singapore's entry into Echo Entertainment being a strategic move leading to an eventual buyout to get a foothold in Australia's casino space, the group later clarified that the stake acquisition was largely an opportunistic portfolio investment. Melbourne-based casino group Crown Limited is unlikely to make a 100% takeover bid, as its intention is just to raise its stake in Echo Entertainment to 25% for greater board influence. We believe that this could have influenced Genting Singapore to dispose of its shareholding in Echo Entertainment as the group is now unlikely to benefit from a 100% takeover bid from Crown Limited.
Maintain NEUTRAL, but FV lowered to SGD1.19. Incorporating the lower disposal value for Echo Entertainment into our SOP calculation, we are marginally nudging down our FV from SGD1.20 to SGD1.19. Given that the group's pullback from extending credit to VIP customers more than offsets the marginal incremental gaming volume arising from the two maiden international market agents, as well as the uncertain economic environment, we believe that the group's earnings may continue to disappoint. This will in turn cap any potential re-rating of its share price.
Genting Singapore announced that it has disposed of its entire 4.8% stake in Echo Entertainment Group Ltd via an agreement with Citigroup Global Markets Australia, which will fully underwrite the disposal. The group stated that the disposal is a part of the rationalisation of its investment portfolio
OUR TAKE
No material impact. As the disposal price of AUD3.99/share is relatively close to the group's average cost of acquisition of AUD4.15/share, the sale will likely give rise to a marginal loss on disposal amounting to about SGD9m (a 1.2% impact on our FY12 earnings forecast). As such, our sum-of-parts (SOP) FV of SGD1.20 remains largely unchanged, as the difference in the ultimate disposal price of AUD3.99 and our marked to market value of AUD4.28/share represents a marginal downward adjustment of SGD14m, or SGD0.01sen/share.
Mainly an opportunistic investment. Contrary to earlier expectations of Genting Singapore's entry into Echo Entertainment being a strategic move leading to an eventual buyout to get a foothold in Australia's casino space, the group later clarified that the stake acquisition was largely an opportunistic portfolio investment. Melbourne-based casino group Crown Limited is unlikely to make a 100% takeover bid, as its intention is just to raise its stake in Echo Entertainment to 25% for greater board influence. We believe that this could have influenced Genting Singapore to dispose of its shareholding in Echo Entertainment as the group is now unlikely to benefit from a 100% takeover bid from Crown Limited.
Maintain NEUTRAL, but FV lowered to SGD1.19. Incorporating the lower disposal value for Echo Entertainment into our SOP calculation, we are marginally nudging down our FV from SGD1.20 to SGD1.19. Given that the group's pullback from extending credit to VIP customers more than offsets the marginal incremental gaming volume arising from the two maiden international market agents, as well as the uncertain economic environment, we believe that the group's earnings may continue to disappoint. This will in turn cap any potential re-rating of its share price.
Source: OSK
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