The group has proposed to acquire sister company Genting Singapore PLC’s entire UK casino operations for a total cash consideration of GBP340 (RM1.67bn). In a separate announcement, the group also said it has formally submitted a bid for the right to develop and operate a video lottery facility at Aqueduct racetrack in New York, US. We view these developments negatively as the relatively high acquisition and development cost is not compensated by meaningful earnings accretion to the group despite Genting UK casinos’ long established operating track record. The proposal being a related party transaction and above the 14% of net assets threshold, it will require minority shareholder approval at an EGM. Given the inherent risk of future value destructive RPTs, we are now attaching no value to the group’s net cash balance in our SOP valuation, which only values its domestic gaming business at 8x EV/EBITDA and a 19% fair value investment in Genting Hong Kong. Consequently, we are cutting our fair value from RM3.15 to RM2.55 and downgrading our recommendation from BUY to SELL.Genting Malaysia Sell by OSK
The group has proposed to acquire sister company Genting Singapore PLC’s entire UK casino operations for a total cash consideration of GBP340 (RM1.67bn). In a separate announcement, the group also said it has formally submitted a bid for the right to develop and operate a video lottery facility at Aqueduct racetrack in New York, US. We view these developments negatively as the relatively high acquisition and development cost is not compensated by meaningful earnings accretion to the group despite Genting UK casinos’ long established operating track record. The proposal being a related party transaction and above the 14% of net assets threshold, it will require minority shareholder approval at an EGM. Given the inherent risk of future value destructive RPTs, we are now attaching no value to the group’s net cash balance in our SOP valuation, which only values its domestic gaming business at 8x EV/EBITDA and a 19% fair value investment in Genting Hong Kong. Consequently, we are cutting our fair value from RM3.15 to RM2.55 and downgrading our recommendation from BUY to SELL.