Stage 2: Listing and Offer for sale of STM Trust on Singapore Stock Exchange: As part of its proposed listing in Singapore, STM Trust will issue 460m new STM Trust units at SGD0.50/unit to raise about RM568m, of which RM527.4m will be utilized to settle the RM527.4m promissory notes held by BST from stage 1 of the transaction. Concurrent to the issuance of new STM Trust units, BST via Berjaya Cayman will make an offer for sale of up to 540m STM Trust units with the intention of raising approximately RM667.4m.

Stage 3: Value unlocking proceeds from offer for sale to be distributed as special dividend. On completion of the entire exercise, BST's stake in its main operating gaming cash-cow, STM, will be diluted from 100% to 79.5%. Meanwhile, the estimated RM667.4m (48sen/BST share) to be raised from the proposed offer for sale will be distributed back to shareholders as a special dividend.

Earnings diluted post exercise but capacity to increase dividends enhanced. BST's earnings are expected to decline by 18.6% after selling its 20.5% stake in STM Trust as part of the proposed listing exercise. However, we note that the entire corporate proposal is expected to unlock RM1.1bn in cash proceeds for BST, thus providing ample scope for the group to raise its ROEs via a more pro-active capital management exercise that would entail a combination of special dividends and near 100% dividend payout vs our current assumption of a 85% recurring payout. Management has indicated that it may distribute the entire 48 sen/share from the offer for sale of its 20.5% stake in STM Trust as special dividend to BST shareholders, with the listed STM Trust itself committing to a 100% dividend distribution policy on a quarterly basis. This implies a dividend yield of 6% at the proposed issue price of SGD0.50/unit.

Source: OSK