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.

 Source: OSK