Monday, June 18, 2012

Genting SP: (The Edge)

Genting SP: (The Edge) Fuels takeover talk as it sets foot in Australia. Size of new stake holdings in Echo entertainment has fuelled speculation for a takeover offer for the Australian listed gaming grp, which runs 4 casinos in Sydney and Queensland. An acquisition of Echo will help Genting SP build a regional footprint and gain a competitive advantage over MBS, enabling Gen SP to cross-sell and achieve synergies among the diff casinos. According to UBS, Echo will offer a welcome boost to Gen SP, as it looks more and more likely that SG junket regime is going to remain too restrictive, but do not rule out Gen SP as being a spoiler in Crown’s (Australia Largest Casino Operator) attempt to take over Echo entertainment, which could give the SG casinos a run for their money. In any case, investors are expecting the Genting Grp to make use of its huge cash hoard. As at end 1Q12, Genting Bhd alone had $7b worth in cash, while Gen SP had $4.8b. Macquarie note that the Co. could get a 17% to 20% boost to EPS and generate 9-12% in returns on invested capital if it initiates a takeover of Echo at A$6/share. All eyes will also remain on Genting SP as speculation of an alliance with Crown mounts. Australian media cited sources as saying Genting and Crown might be meeting to discuss some form of collaborations.

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