aAccording to the Press, a casino joint venture between Genting Hong Kong Ltd and Alliance Global Group Inc has hired five banks for an up to US$500mil IPO in Manila.

- Travellers International Hotel Group, as the Genting-Alliance venture is called, plans to go public in 3Q2013.

- Travellers is exploring ways to finance its projects via debt and equity. One of its projects is “Resorts World Bayshore” at Manila’s Entertainment City.

- “Resorts World Bayshore”, which is expected to cost US$1.1bil, is targeted for completion in FY16F.

- We are neutral on the impact of this development on Genting Malaysia Bhd (GenM). GenM currently owns 18.4% of Genting Hong Kong Ltd. As its shareholding is below 20%, GenM does not recognise any share of profits in Genting Hong Kong.

- Contribution from Genting Hong Kong to GenM is in the form of dividend cashflows.

- However, GenM is an indirect beneficiary of the potential rise in Genting Hong Kong’s share price. Based on Genting Hong Kong’s current share price of US$0.475/share, we estimate that GenM’s stake in Genting Hong Kong is worth US$679.8mil or RM2.1bil.

- Travellers Group is profitable. The group’s net income improved from US$111.9mil in FY11 to US$159.8mil in FY12. Revenue climbed 14.1% from US$659.3mil in FY11 to US$752.4mil in FY12.

- Companies on the Philippines Stock Exchange (PSEi) are currently trading at an average FY13F PE of 20.9x.

- We maintain a BUY on GenM for the resilience of its domestic casino earnings and growing overseas casino contribution.

Source: AmeSecurities