Wednesday, June 27, 2012
Genting SP: Deutsche maintains Hold with $1.65 TP. House note that the NSW Independent Liquor & Gaming Authority said that it has received an application from Genting to acquire more than 10% of Echo Entertainment. The regulator has said that they will consider the application, but there is no visibility on the requried time frame for it to determine the application. At this stage, Genting's investment intention in Echo remains unclear. The latest move, allows the Genting group to play catch up with Crown, and possibly remove any regulatory disadvantage that may jeopardize its investments. By end FY12E, Deutsche forecast Genting SP to have $5.3bn (A$4.2bn) gross cash or marginally net cash. While the jury is still out on Genting's game plan, one may have to take the view that there will be significant operational improvements in existing Echo properties and/or there is opportunity to add gaming capacity in Sydney to justify premium valuation. Echo holds a 99-year license to operate in NSW (Star City, Sydney) with exclusivity until 2019 and three other smaller casinos in Queensland (Jupiters Gold Coast, Treasury Brisbane and Jupiter Townsville). In FY11, its Sydney and Queensland casinos generated EBITDA of A$286.4m and A $159.6m, respectively. DB forecasts EBITDA contribution of A$280m and A$144m respectively for June FY13E.