• Genting Bhd has completed book building and priced an offering of US$500mil (RM2.1bil), 4.25% guaranteed notes due year 2027F. This is in addition to the US$1bil guaranteed notes, which were issued in January 2017. The first tranche notes fetched a coupon rate of 4.25%.

• Moody's and Fitch have assigned ratings of Baa1 and A- to the US$500mil notes respectively. The first tranche of US$1bil notes was given similar ratings by the rating agencies.

• Genting Bhd said that the proceeds will be used to replace certain borrowings. The proceeds will also be used for other purposes such as working capital and making investments, which may include the development of Resorts World Las Vegas (RWLV).

• We estimate that Genting Bhd's interest expense will increase by almost 10% as a result of the issuance of the US$500mil guaranteed notes. We estimate that Genting Bhd's FY18F net profit will decline by 5% due to the higher interest expense.

• We think that proceeds from the guaranteed notes will be used to finance the development of RWLV. The development cost of RWLV is estimated to be US$3bil. Equity portion of the financing is expected to be US$1bil. RWLV is anticipated to be completed in year 2020F.

• The design of RWLV has been finalised. Genting Bhd is in the process of awarding construction contracts for the development of RWLV. Phase 1 of RWLV is expected to consist of the casino, hotels, retail and food and beverage outlets.

• Genting Bhd was in a net cash of RM1.4bil at the company level as at end-FY16. However, we believe that the group has swung into a net debt position due to financing for RWLV and other projects. TauRx Pharmaceuticals completed a US$70mil rights issue recently. We believe that Genting Bhd's 20.6% portion of the rights issue was US$14mil (RM59mil).

• Maintain SELL on Genting Bhd with a fair value of RM9.65/share. Genting Bhd is currently trading at FY17F PE of 20.9x and FY18F PE of 20.8x.

Source: AmInvest Research - 12 Oct 2017