Genting International, the overseas investment arm of Malaysian gaming operator Genting Berhad, completed the institutional tranche of its upsized Singapore IPO on Friday (December 2). Under the lead management of DBS, CIMB, CLSA and Merrill Lynch, the Kuala Lumpur-listed group will issue a total of one billion shares raising S$350 million ($207 million).
The deal has four components of which the largest comprises a placement tranche of 750 million shares. This has achieved an oversubscription ratio of just over seven times, with participation by over 150 investors, of whom roughly three quarters come from Asia.
In addition, there is a corporate tranche of 97 million shares, which has largely been placed with four investors of whom one is connected to Singapore's Pontiac Land and the other three to local hotelier Ong Beng Seng. On top of this, there is a 50 million retail tranche and 103 million share tranche to local brokers. The retail offering will close on December 8, with listing expected on December 12.
Pricing has been set at S$0.35 per share. This has come just below the mid point of the deal's S$0.30 to S$0.42 indicative range. It also represents a 17% discount to the group's OTC share price.
Previously, the stock was trading by appointment in Singapore and listed in Luxembourg. Initially the Lim family, which controls Genting, had said they would issue 600 million to 800 million new shares via the IPO.
They subsequently decided to upsize the deal slightly, but observers say they were also very conscious about avoiding dilution since the deal is entirely composed of primary shares. On completion it will see Genting International's freefloat expand from 8.4% to 25.2% (post shoe).
Their desire to list the company in Singapore is said to be two fold. Firstly, they believe it will be a good strategic move since they are bidding for one of two government gaming licenses. Secondly, they want to raise funds to pay for a license in the event of a successful bid.
The Singapore gaming licenses lay at the heart of the IPO, which is currently little more than a concept stock with no real assets of its own. Some commentators had thought that this would make it a difficult sell.
However, the group's recent OTC performance has already given a strong indication of investors' willingness to disregard fundamentals for what is currently such a hot sector in Asia. Over the past six months, for example, the stock has risen from S$0.15 to S$0.25. The IPO price is equivalent to roughly S$0.20.
Earlier this year, the Singapore government announced that it would issue two gaming licences - one for a Marina Bay development and one for Sentosa Island. A total of eight consortia are bidding, of which a tie-up between Singapore's CapitaLand and MGM is hot favourite to the win the former, while a tie-up between Genting and Universal Studios is similarly fancied to win the latter.
Company supporters say that Universal's global expertise and Genting's regional experience should play well in their favour. "The Singapore government wants to make the Sentosa development family oriented, which will play to Universal's strengths," he comments. "At the same time, Genting is very adept at dealing with cultural sensitivities. After all, it has been successfully operating a gaming operation in a neighbouring Muslim country for many years."
The RFP (Request For Proposals) is due during the first half of 2006. In addition to the Singapore license, Genting is also said to be exploring opportunities in Macau.
In the absence of new investments, the listco is left with two stakes in London-listed gaming companies and some cash. It holds a 24% stake in London Clubs International and a 28% stake in Stanley Leisure.
Specialists say the IPO has been priced at a 40% premium to the market value of these stakes. Based on a market cap of $1.12 billion, the deal has also come a signficant premium to the group's Net Asset Value of $600 million.
Given its lack of earnings, it looks very expensive on a P/E basis (70 times historic earnings) and is therefore much more of a high option play. During the first half of the year, it recorded net income of $17.8 million.
Its parent, Genting Berhad, is currently trading at about 13 times 2006 earnings. This places it at a big discount to global comparables such as Wynn Resorts (35 times) MGM (30 times) and Stanley Leisure (20 times).
