March 18, 2010

GENM - Price Target News

Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: AMMB

KUALA LUMPUR: AmResearch Sdn Bhd has accorded fair value of RM3.40 for Genting Malaysia and has a Buy at the current price of RM2.82.

It said on Thursday, March 18 that GenM has subscribed for US$18 million (RM59 million) nominal amount of 9% senior secured notes issued by MGM Mirage Inc due March 2020. This is GenM's third investment into the papers of its peers.

The Notes were offered as part of a placement of US$845 million of the Notes announced by MGM on March 9. Proceeds from the Notes will be used by MGM to repay its
borrowings. Notes are secured by a mortgage on MGM Grand Las Vegas.

"We estimate annual coupon payments from all of GenM's investments in the notes of various gaming companies at RM28mil. This is about 2% of GenM's FY10F net profit of RM1.3 billion," it said.

"From previous conference calls, we understand that GenM is investing in papers of casino companies and not companies from other industries, as the gaming industry is an industry, which the group understands very well," it added.

AmResearch said it appears that for now, GenM's preferred investment exposure into United States is via debt instruments of other gaming companies. However, we believe that there are opportunities to invest directly into casino assets in US. Reuters reported MGM Mirage would be selling its 50% stake in Borgata Hotel Casino & Spa in favour of its investments in Macau.

"Hence, we are keeping GenM as a BUY for potential overseas investments and its huge cash reserves. Earnings are also resilient driven by the group's domestic-centric casino business," it said.

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