Journey to Wealth
Genting Bhd - Establishes RM2bil MTN programme Buy
- Genting Bhd has announced that it will be establishing a medium-term notes (MTN) programme of RM2bil.
- The rating of the MTN is AAA. The proposed MTN will have a tenure of 20 years. CIMB, HSBC and Maybank Investment Bank have been appointed as joint advisers for the proposed MTN.
- According to the Bursa Announcement, proceeds from the MTN will be used for operational expenses of Genting Bhd and to finance the subsidiaries' operating expenses, capex and investment plans.
- We are puzzled by Genting Bhd's MTN. We wonder if the MTNs would be used to subscribe for any of the subsidiaries' rights issue.
- At Genting Bhd's company level, the only unit which is expected to incur heavy capex is the oil and gas division. The oil and gas division carried out exploratory activities, which cost RM229.9mil in FY10. Apart from oil and gas, Genting Bhd also has power assets in China and Malaysia, which recorded an EBIT of RM632mil in FY11.
- Among the subsidiaries, we believe that Genting Singapore PLC (GenS) and Genting Malaysia Bhd (GenM) are the most aggressive in overseas expansion. Currently, GenS is working on two projects. Recently also, GenS raised S$2.3bil in perpetual bonds.
- So far, GenM has not carried out any major fund-raising exercise. The group relied on external borrowings to finance the development of 'Resorts World New York' (RWNY).
- Going forward, however, GenM would have to find ways to finance the US$4bil extension of RWNY if it successfully concludes negotiations with the Empire State Development Corporation of New York by 30 November 2012. GenM had net cash of RM343mil as at endFY11.
- As for Genting Plantations (GenP), we reckon that the group would be able to finance its expansion in Indonesia without any cash calls. GenP's capex amounted to RM121.4mil in FY11. GenP had net cash of RM589.8mil as at end-FY11.
- We maintain a BUY on Genting Bhd. We reckon that the recent fall in Genting Bhd's share price presents a good opportunity to buy.
Source: AmeSecurities
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