• Genting Malaysia has issued RM2.6bil worth of medium-term notes (MTN) via three tranches. Tenure of the three tranches of MTN ranges from five to 15 years. Coupon rate of the three tranches of MTN ranges from 4.98% to 5.58% per annum.

• GenM said that the MTN would be used to finance operating expenses, investments and other requirements including the redevelopment of properties or resorts in the group.

• This is the second batch of MTN that GenM has issued. In April 2017, GenM issued MTN of RM2.6bil via three tranches. The coupon rate of the MTN ranged from 4.78% to 5.2% per annum.

• We are neutral on the issuance of the MTN. We estimate that the coupon payments for the MTN would reduce GenM’s FY19F net profit by 5% to 7%.

• We believe that the MTN would help in the funding of Phase 2 of the Genting Integrated Tourism Plan (GITP) at Resorts World Genting.

• Also, the increase in cash reserves from the MTN would help in the financing of overseas casino projects. Recall that recently, GenM lost in its Euro140mil bid for a casino cum resort in Andorra.

• GenM has spent about RM6.7bil out of the RM8.1bil allocated for Phase 1 of the Genting Integrated Tourism Plan at Resorts World Genting, Malaysia. Hence, most of Phase 1 of GITP has been completed except for the outdoor and indoor theme parks.

• Phase 2 of GITP is expected to cost about RM2.28bil. We believe that Phase 2 would consist of the development of a high-end hotel.

• Maintain Hold on GenM with a fair value of RM5.45/share.

Source: AmInvest Research - 12 Jul 2018