Tuesday, October 25, 2011

Genting SP

Genting SP: +0.6% at $1.63 after the group Monday announced the disposals of E-Genting and Ascend International (IT, consultancy services) to sister co Genting Msia, for a total of RM50m and Genting Alderney (online gaming services) to Resorts World Inc. for £3m and 50% of WorldCard International (manages WorldCard loyalty programmes) to Resorts World Inc for US$1.
CIMB says the related-party transactions might be perceived negatively at first glance, "but these assets offer no direct synergies to Resorts World Sentosa. Their disposal should allow the channeling of more resources to the Integrated resort." The house retains its $2.18 target price and Outperform rating.
Says the sale prices seem fair and "since Resorts World Sentosa is Genting SP's core money spinner”, views the rationalising of its non-core assets a sensible move that should allow the company to channel its attention to the continuous development of the integrated resort. Adds, current valuations "offer good buying opportunities into Genting SP's long-term growth prospects."

Separately, Nomura says Genting SP could see the growth of its domestic gaming market capped by the increase in casino exclusion orders barring individuals from entering the city-state's two casinos. Notes govt data show 3Q total casino exclusion orders rose 24% on-quarter to 58,350 (or 2.4% of the Spore population between 21-79 years old), including a 60.7% rise in the total no. of people who applied to exclude themselves. Says, "the continuous rise in exclusion orders could have a negative impact on the domestic business", noting the 2010 surge in the mass-market gaming business was largely led by "hardcore" gamblers. "We believe gaming's growth potential, especially in the domestic mass-market business, could be capped as more people are turning for help (in applying for self-exclusion)."
While Genting SP’s valuations are inexpensive, Nomura believes the casino operator has mediocre growth prospects unless junket licenses are issued, keeping a Reduce rating with TP $1.41.

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