Genting Malaysia Bhd
(May 12, RM4.27)
Maintain buy with a target price (TP) of RM4.60: Genting Malaysia Bhd seeks a mandate from its shareholders to dispose of all its 1.4 billion shares or a 17.8% stake in Genting Hong Kong Ltd.

Any approval from shareholders will be valid for one year from the date of approval at an extraordinary general meeting to be convened.

Genting Bhd and its affiliates will not be allowed to vote then. The shares may be disposed of on- or off-market in multiple tranches at multiple prices to third and/or related parties.

The disposal share price shall not be at more than 20% discount to the five-day volume-weighted average price of Genting Hong Kong share prices before the date of sale. 

Nonetheless, the minimum disposal share price shall not be less than 33 US cents (RM1.18) per share (last price: 37.5 cents). Consideration for the shares will be in cash.

The shares are recognised as “available for sale financial assets” in Genting Malaysia’s accounts at 8 cents per share.

If all the shares are sold at their last price, Genting Malaysia will receive cash of US$536.6 million (34 sen per Genting Malaysia share) and recognise a one-off gain of US$422.2 million (27 sen per Genting Malaysia share).

Genting Malaysia plans to utilise the cash proceeds to fund the RM5 billion Genting Integrated Tourism Plan, investments and/or working capital. That said, there is no guarantee that all the shares will be sold at the current price.

We are more conservative as we value Genting Malaysia’s 1.4 billion Genting Hong Kong shares at a slightly lower 35 cents (32 sen per Genting Malaysia share).

Even if all the shares were sold at the minimum disposal price of 33 cents, our sum-of-parts (SOP)-based TP would be reduced by a mere two sen.

We are neutral on this development. We maintain “buy” on Genting Malaysia with an unchanged RM4.60 SOP-based TP.

We hope this move will allow Genting Malaysia to embark on more capital management (i.e. more dividends and/or share buy-backs). — Maybank IB Research, May 12

This article first appeared in The Edge Financial Daily, on May 13, 2015.