Stock Name: GENM
Company Name: GENTING MALAYSIA BERHAD
Research House: HWANGDBS
Genting Malaysia Bhd
(April 26, RM2.86)
Maintain buy at RM2.85 with target price of RM3.90: Genting Malaysia Bhd (GenM) has invested another US$48 million (RM152.6 million) in MGM Mirage's 4.25% convertible senior notes (2010/2015) as part of the latter's recent US$1.15 billion placement.
This is on top of GenM's earlier US$18 million investment in MGM's 9% 10-year senior secured notes (2010/2020) in March this year, and US$25 million in 10.375% notes due May 2014 and US$25 million 11.125% notes due November 2017 acquired in May 2009.
This brings GenM's total investment in MGM to US$116 million (RM371 million). Back in May 2009, Genting Bhd (which owns 48.26% in GenM in latest available filings) had also invested US$100 million for a 3.2% equity stake in MGM and US$50 million in similar senior secured notes as GenM.
The latest notes proceeds will be used to repay a portion of MGM's revolving indebtedness under its senior credit facility. The notes are general unsecured senior obligations of MGM, guaranteed by substantially all of its subsidiaries.
Interest is payable semi-annually, and the notes are convertible anytime at an initial conversion price of US$18.58 (27.5% premium to MGM's share price).
We see minimal impact to GenM's earnings and RM5.2 billion cash reserve. We try not to read too much into the investment given the small quantum, although the notes' coupon does seem rather unattractive (almost similar to Malaysian Government Securities 10-year yield of 4%).
Genting group was reported to be interested in investing in the US, and this could be a pre-cursor to bigger things to come. MGM had indicated in March 2010 that it would be selling its 50% stake in Borgata Hotel Casino & Spa in Atlantic City as part of a settlement with the New Jersey Division of Gaming Enforcement (the New Jersey casino controller had expressed concern over MGM's ties with Pansy Ho, its joint-venture partner in Macau).
We maintain our buy call on GenM and sum-of-parts target price of RM3.90, with potential catalysts being resilient Malaysian gaming operations despite the opening of Singapore's "integrated resorts" since 85% of visitors to Gentings Highlands are locals with 75% being day-trippers.
Secondly, there is the possible upside from opportunistic mergers and acquisitions with RM5.2 billion cash reserve. Our valuation remains attractive at 9.3 times 2011 price-to-earnings ratio (ex-cash) and 5.6 times EV/Ebitda (enterprise value to earnings before interest, tax, depreciation and amortisation). - HwangDBS Vickers Research, April 26
This article appeared in The Edge Financial Daily, April 27, 2010.
Company Name: GENTING MALAYSIA BERHAD
Research House: HWANGDBS
Genting Malaysia Bhd
(April 26, RM2.86)
Maintain buy at RM2.85 with target price of RM3.90: Genting Malaysia Bhd (GenM) has invested another US$48 million (RM152.6 million) in MGM Mirage's 4.25% convertible senior notes (2010/2015) as part of the latter's recent US$1.15 billion placement.
This is on top of GenM's earlier US$18 million investment in MGM's 9% 10-year senior secured notes (2010/2020) in March this year, and US$25 million in 10.375% notes due May 2014 and US$25 million 11.125% notes due November 2017 acquired in May 2009.
This brings GenM's total investment in MGM to US$116 million (RM371 million). Back in May 2009, Genting Bhd (which owns 48.26% in GenM in latest available filings) had also invested US$100 million for a 3.2% equity stake in MGM and US$50 million in similar senior secured notes as GenM.
The latest notes proceeds will be used to repay a portion of MGM's revolving indebtedness under its senior credit facility. The notes are general unsecured senior obligations of MGM, guaranteed by substantially all of its subsidiaries.
Interest is payable semi-annually, and the notes are convertible anytime at an initial conversion price of US$18.58 (27.5% premium to MGM's share price).
We see minimal impact to GenM's earnings and RM5.2 billion cash reserve. We try not to read too much into the investment given the small quantum, although the notes' coupon does seem rather unattractive (almost similar to Malaysian Government Securities 10-year yield of 4%).
Genting group was reported to be interested in investing in the US, and this could be a pre-cursor to bigger things to come. MGM had indicated in March 2010 that it would be selling its 50% stake in Borgata Hotel Casino & Spa in Atlantic City as part of a settlement with the New Jersey Division of Gaming Enforcement (the New Jersey casino controller had expressed concern over MGM's ties with Pansy Ho, its joint-venture partner in Macau).
We maintain our buy call on GenM and sum-of-parts target price of RM3.90, with potential catalysts being resilient Malaysian gaming operations despite the opening of Singapore's "integrated resorts" since 85% of visitors to Gentings Highlands are locals with 75% being day-trippers.
Secondly, there is the possible upside from opportunistic mergers and acquisitions with RM5.2 billion cash reserve. Our valuation remains attractive at 9.3 times 2011 price-to-earnings ratio (ex-cash) and 5.6 times EV/Ebitda (enterprise value to earnings before interest, tax, depreciation and amortisation). - HwangDBS Vickers Research, April 26
This article appeared in The Edge Financial Daily, April 27, 2010.
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