Journey to Wealth
Genting Bhd - 1MDB buying Genting Sanyen?
News It was reported in the Business Times today that 1 Malaysia Development Bhd (1MDB) is buying Genting Sanyen from Genting group for RM3b-RM3.5b.
The source quoted said the deal is reaching its final stage and will be announced soon.
Comments This comes as a surprise to us given that the company has won the bid last month to build a USD1.0b greenfield 660MW coal-fired power plant in Indonesia.
At this juncture, it is not clear if the deal involves only the Malaysian asset or overseas IPPs. Judging from the price tag, we believe the deal, if materialises, would involve all power assets except the upcoming Indonesia IPP.
Note that besides Malaysia and the new upcoming plant in Indonesia, Genting has two other power assets in India and four others in China.
In our SOP, we value the Malaysian asset at RM529m as its PPA is coming to an end in 2015. The non-Malaysian IPP (ex-Indonesia new plant) is worth RM2.17b. As such, the price tag of the reported RM3b-RM3.5b is a good deal.
On the overall, we are positive if the deal materialises as it will allow the group to better focus on its core gaming operations.
Outlook The possible disposal of its power assets will potentially reduce GENTING's FY13E earnings by c.8% but will add RM0.08-RM0.22/SOP share to our valuation.
Forecast No changes to our estimates.
Rating MAINTAIN OUTPERFORM
Valuation We are maintaining our target price of RM11.69/share based on a 10% holding
company discount to its SOP.
Risks Risks to our call are 1) poor luck factor and 2) a substantial decline in CPO prices.
Source: Kenanga
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