Lim family seeks to sell 9% of Genting Singapore

Two investment companies controlled by Malaysia's Lim family were in the market last night attempting to divest their direct 9% stake in Genting Singapore, a Singapore-listed subsidiary of the Genting Berhad group. Genting Singapore is involved in international casino operations and the development of integrated resorts, including a new casino resort on Singapore's Sentosa Island, which is due to open in the first quarter of next year.

The 853.88 million shares were offered in a range between S$0.72 and S$0.76 and late last night the indication was that the price would be fixed at the bottom for a total deal size of S$614.8 million ($425 million). However, the deal wasn't launched until 8.30pm Hong Kong time yesterday and, at the request of a number of Asian investors, sources said the bookrunners had agreed to open the books for a short while before the start of trading this morning to give those who were unable to make an investment decision last night a second chance.

As a result, the terms will not be fixed until this morning. However, the deal was already covered last night and the books included close to 40 accounts. The buyers ranged from specialist gaming investors to long-only Asia funds to deal players who liked the big discount.

The price range corresponded to a discount range of 12.1% to 16.8% versus yesterday's close, which at first glance looks well wide of where most other recent Asian placements have priced. However, the share price has rallied 18.5% over the past three trading sessions, which means investors may have needed the additional incentive to invest at current levels.

There is a lot of positive momentum surrounding the company at the moment however and the share price has more than doubled from the beginning of March when it matched its 2009 low of S$0.415. The company has caught the attention of investors as, contrary to other casino and resorts developers, it is seemingly having no problems to stick to its completion target.

This was confirmed two weeks ago in connection with Genting Singapore's first quarter earnings release, when the management said that it will deliver the Sentosa resort on time and on budget. It also stressed that there is no need to raise more money for this project. This is in sharp contrast to some of its larger rivals like Sands and MGM, which are already laden with debt and have been forced to delay projects because of difficulty in securing the necessary funding. In fact, market talk has it that MGM is looking to sell its 50% stake in MGM Grand Macau and Genting may be a potential buyer.

Aside from Singapore, Genting currently has casino and leisure operations in Australia, the Americas, Malaysia, the Philippines and the UK, but nothing yet in Macau.

Sources say the fact that the Lim family is selling its entire direct stake in Genting Singapore, which it holds through investment companies Golden Hope and Lakewood, isn't a reflection of its views on the company. But with the share price having gone up so much in such a short time, it makes sense for them to monetise part of their holdings. It will also streamline the family's holding in the casino business through one vehicle. The family will still control 55% of Genting Singapore through Malaysia-listed conglomerate Genting Berhad.

J.P. Morgan and UBS acted as joint bookrunners and underwriters for the deal.