GenM Minority Holders: Do not Chicken Out!

You will be given your chance to fight big business come the next GenM EGM to reject or endorse the UK casino buy-out from GenS soon. Do not squander this one-in-a -billion chance!

Tell Kok Thay and his comatose BOD that enough is enough! Reject the deal! Save your coffer!

Let us read this report from the Malaysian Business Times.

"Minority shareholders may stymie Genting Malaysia Bhd's plan to buy Genting Singapore plc's casino business in the UK for £340 million (RM1.66 billion), analysts said yesterday.

This is the second largest related party transaction (RPT) involving the Genting group in a decade, following subscription of US$442 million (RM1.42 billion) Star Cruises shares, the 10 per cent purchase of Walker Digital Gaming for US$69 million (RM222 million) and the acquisition of Wisma Genting and Segambut property for RM284.1 million.

Genting Singapore is the biggest gaming operator in the UK with 44 venues under the Circus, Maxims and Mint brands.

"The purchase is a bit pricey, and delinquent shareholders are bound to raise the matter at the forthcoming EGM (extraordinary general meeting)," Affin Securities gaming analyst Chong Len Len told Business Times.

Genting, the country's sole casino operator, told the stock exchange on Thursday it will soon hold a special meeting to seek shareholders' support for the plan.

Since it is an RPT for Genting, Kien Huat Realty Sdn Bhd and Parkview Management Sdn Bhd, which collectively own 48.67 per cent of Genting, will not be able to vote at the meeting.

Likewise, Genting's chairman Tan Sri Lim Kok Thay, who is also the executive chairman and shareholder of Genting Singapore, will not be able to vote.

A slew of foreign funds such as Vanguard Emerging Markets Stock Index Fund, the Government of Singapore Investment Corp and Comgest Growth Emerging Markets own small chunks of Genting.

News of the planned purchase brought downgrades from research firms such as HwangDBS Vickers, OSK Research and Deutsche Bank. This took its toll on Genting shares yesterday.

The stock fell 12 sen to RM2.62 sen a share on heavy volume, just 11 sen higher than its lowest closing price in 52 trading weeks.

Elsewhere, Samuel Yin Shao Yang, a senior associate at ECM Libra, described the deal as value-destroying without accreting earnings.

"The fact that more than a quarter of Genting's net cash will be spent on an RPT, which is barely earnings accretive, does not sit easy with us," Yin wrote in the report. He recommended that investors sell the stock.

He reasoned that the Genting Group's rationale that only Genting Malaysia within the group has the financial muscle does not hold water.

"We beg to differ because as at December 31 2009, Genting Singapore's cash balance stood at S$2.8 billion (RM6.4 billion) and its net gearing was comfortable at 24 per cent," wrote Yin in the report.

He estimates that if Genting did not buy the casino assets from its sister company, the Malaysian outlet will have a cash war chest of RM6 billion by the year-end."

So say your piece at the EGM or forever hold your peace and suck on your thumbs!

GenM: Rumble Tumble

So, when it stung, it stank!

Shares of Genting Malaysia Bhd fell as much as 10 per cent today [2 July 2010] over concerns that its proposed acquisition of casino operations in the UK from its Singapore affiliate was too risky.  

Genting shares dropped 28 sen, the most in nine years, to hit a low of RM2.46 before recovering to RM2.62 as at 12.15pm.

OSK Research has also cut its fair value for Genting shares from RM3.15 to RM2.55 and downgraded the stock from “Buy” to “Sell”.

Malaysia's sole casino operator had proposed to acquire the casino operations in UK (Genting UK) from its affiliate company Genting Singapore Plc for about RM1.7 billion. It had also separately proposed to develop a video lottery facility at the Aqueduct “racino” which combines racing with casinos.

OSK Research said in a report today that it felt the acquisition and development cost was not compensated by meaningful earnings growth prospects. It also said that there was inherent risk of future “value destructive related party transactions” and as a consequence is attaching no value to the group’s net cash balance.

“We view these developments negatively as the relatively high acquisition and development cost is not compensated by meaningful earnings accretion to the group despite Genting UK casinos’ long established operating track record,” said OSK Research.

It said that it was “cautious” on the medium-term viability of the US racino project pending more details on the development expenditure of the Genting bid.

It also noted that the winning bidder has to pay an upfront US$300 million (RM971 million) in non-refundable payment, which could be deemed a licensing fee.

“As such, we think that the cost of development could easily exceed RM1 billion,” said OSK.

Genting said in a statement yesterday that the proposed acquisition of Genting UK complemented its long-term international expansion plans.

The acquisition however will have to be approved by Bank Negara and the British Gambling Commission.