Genting S’pore may gain following news that it is divesting its money-losing UK gaming operations to parent Genting M’sia for £340m ($688.8m) cash, which will ease pressure on its bottomline. Genting S’pore acquired its UK assets for £627m in 2006 but subsequently wrote it down to £289m. Impairment loss of $478m relating to its UK operations led to the group’s $396.3m net loss in 1Q10. The sale is pegged at 11.2x 2011 EV/EBITDA, which is above sector average.
We see this deal as positive for Genting S’pore - 1) no longer dragged down by the continued underperformance of its UK investments; 2) makes it a pure play on Resorts World Sentosa, which is far more profitable and 3) beef up its balance sheet, which should enable it to compete better. We expect the stock to break free of $1.20 resistance and head for $1.30 in near term.
Meantime, casino revenue in Macau surged 65% to US$1.7bn last month buoyed by high rollers from China.
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