Genting Singapore

Published June 24, 2011

Genting plans US$3b Resorts World Miami

By LEE U-WEN

(SINGAPORE) Just 16 months after opening Resorts World Sentosa (RWS) in Singapore, Genting Malaysia is now busy spreading its wings further in the North American market, with ambitious plans to build a US$3 billion luxury hotel resort in downtown Miami.
I love Miami: Mr Lim says it's destined to become one of the greatest global cities, soon connecting Asia with the Americas, with direct flights from Singapore and HK

The mixed development project - called Resorts World Miami - will feature a hotel, convention space, entertainment outlets, restaurants, and retail, residential and commercial facilities. It is expected to create tens of thousands of jobs for the struggling economy of the city in the state of Florida.

This will be Genting's second major venture in the United States, having already begun construction of its Resorts World Casino New York. The mega gaming facility at the historic Aqueduct Racetrack in South Queens - the first-ever casino in New York City - is now hiring for over 2,100 positions and will open its doors in the fourth quarter of this year.

But unlike its counterparts in New York, Malaysia and Singapore, Resorts World Miami may not have a money-spinning casino to boost its coffers because of strict Florida laws that ban gaming beyond tribal lands, although analysts believe that the state is poised to liberalise its gaming sector sooner rather than later.

Still, Genting delivered a statement of intent last month to press ahead with plans to build Resorts World Miami as it sealed one of the most expensive real estate deals in Miami's history. The company announced that it would fork out US$236 million for a 5.7 hectare plot of waterfront property in the bustling downtown area where the offices of The Miami Herald newspaper now stand.

In a recent filing with Bursa Malaysia, Genting said that it was looking at funding the purchase through bank borrowings and internally generated funds.

'I believe Miami is destined to become one of the greatest global cities in the world,' said Genting chairman and chief executive officer Lim Kok Thay, at a reception of some 200 business and civic leaders in Miami last week. 'With planes now able to fly non-stop from Singapore and Hong Kong, Miami will soon connect Asia with the Americas.'

Newly appointed Resorts World Miami president Mike Speller said that the project would be 'another big boost for the South Florida economy and Miami's status as a global tourist destination'.

Genting has already appointed renowned architecture and interior design group Arquitectonica to come up with the project's initial master plan by the end of August.

Bernardo Fort-Brescia, the firm's co-founder and principal, said in a speech at the same reception last week: 'I have visited Resorts World Sentosa in Singapore and was impressed by the design, the quality of landscaping, the world- class art and the high calibre of the project's operations. Resorts World Miami will be a great contribution to the tourism, entertainment and real estate markets of Miami and South Florida.'

As to whether the resort could feature a casino in the future, the outcome remains in doubt because both political and community support is needed for Miami to pass new gaming laws - a process that could take years.

Miami Mayor Tomas Regalado, however, threw his support behind Genting's plans to put a casino on the ground level with the resort area above it, so as to appeal to non-gambling visitors.

Mr Regalado, a long- time advocate for expanding Miami's gaming beyond tribal lands, told The Miami Herald: 'The way they have presented it, I do support that. What they're trying to do here is smart: bringing tourists to the resort. If you want to go to the casino, fine.'

Building Resorts World Miami will not be the first time that Genting has invested in South Florida. In 2000, it acquired Miami- based Norwegian Cruise Line (NCL) and currently owns a 50 per cent share.

Mr Lim made reference to the NCL purchase as he described a history with Miami that dates back to his undergraduate days in London 40 years ago, when he first visited the city.

'I enjoyed all that Miami could offer to a young man and I fell in love with Miami, and have come back many, many times. I always feel at home,' he said.

Besides expanding in the US, Mr Lim also revealed last month that Genting is seriously considering opening a casino in Taiwan's scenic Penghu archipelago should the government there give the green light, possibly as early as within the next few months.

Link

Saturday June 25, 2011
Genting making inroads into overseas markets

YOU cannot accuse Genting Malaysia Bhd of allowing its cash pile to remain idle. Not when it is busy ploughing funds into its global expansion programme.

The Malaysian resort and gaming giant has been making some headway in the global leisure and hospitality industry over the last one year, as it gains a foothold in the European and American markets.

In October last year, for instance, the company completed its acquisition of Genting Singapore plc's casino operations in the United Kingdom for a total cash consideration of 340mil (RM1.67bil). The operations there boast the largest number of casino properties in the United Kingdom, with 44 units, including five in London.

Last month, Genting Malaysia announced its second venture in the United States. This latest project, centered in the city of Miami in the southern state of Florida, comes after the company won the bid to build a video lottery facility at the Aqueduct Racetrack in New York City in August last year.

“Genting Malaysia is well positioned to expand its business overseas given its huge cash reserves; we expect such endeavour to boost the company's earnings potential over the medium to longer term,” an analyst shares with StarBizWeek.

As at the end of the first quarter (Q1) to March 2011, Genting Malaysia had an estimated net cash of RM2bil. The company had an accumulated cash hoard of RM2.87bil at the end of financial year (FY) ended Dec 31, 2010, compared with RM5.25bil at the end of FY2009.

“Unless a portion of its money is put to work, sitting on such a huge pile of cash could prove to be a costly luxury in terms of good investment opportunities foregone if it's not invested in high-growth markets,” the analyst explains.
Cash cow: Genting is well-positioned to expand its business overseas given its huge cash reserves.

Miami-wise

Genting Malaysia announced its acquisition of a 13.9 acres in Miami for US$236mil (RM718mil) last month. It plans to finance the deal through a combination of internally-generated funds and bank borrowings.

The acquisition, which was done through subsidiary Bayfront 2011 Property LLC, worked out to be US$390 per sq ft, which most analysts considered a fair price to pay for the premium location, and some considered the deal was to Genting Malaysia's advantage, given the still-strong ringgit against the dollar.

In OSK Research's recent analysis of Genting Malaysia's Miami venture, the local research house said Genting Malaysia's cash hoard has rightly put the group in a position as first-mover in a potentially lucrative integrated casino market should Florida liberalise the industry.

Gaming operations are currently banned from being built outside tribal lands by the state, although gaming giants such as the US-based Las Vegas Sands Corp have been lobbying to persuade lawmakers to allow for full casino gambling in the state.

According to OSK Research, casino income typically contributes more than 80% of Genting Malaysia's integrated property portfolios.

Hence, the liberalisation of the casino industry in Florida is crucial for the company to unlock value from its Miami investment.

Genting Malaysia has said that it plans to build a US$3bil (RM9.12bil) mixed development project comprising hotel, convention centres, restaurants, shopping malls and residential towers on the land it bought in Miami.

Last week, the company announced it had already appointed a local architect, Arquitectonica, to draw the master plan for its Resorts World Miami project, with the initial draft expected to be ready by the end of August.

What's missing at this point in time is the local authority's approval to build a casino operation there.

“Should it get a licence to operate a casino there, the payback for its investments in the Miami project would definitely be much faster, and that would serve as a much bigger catalyst in earnings potential,” an analyst explains.

According to market observers, the process of the company securing a casino licence in Florida, if it ever will, could take several years.

Hence, it is widely believed that Genting Malaysia would not rush into developing the Miami land. Pending further details, most analysts therefore remain neutral to mildly positive on the company's prospects there.

Overseas profits

Meanwhile, construction of Genting Malaysia's New York operations is steadily making progress, with the opening of Resorts World New York slated for the fourth quarter of this year. Contributions from the New York venture will likely be more meaningful after its full launch in the first quarter of next year.

To recap, Genting Malaysia won the bid to develop and operate a video lottery facility at the Aqueduct Racetrack in New York City in September last year through its subsidiary Genting New York LLC.

The facility, now known as Resorts World New York, will feature about 4,500 video lottery terminals, convention halls and food and beverage outlets and other resort facilities.

Earlier reports said Resorts World New York could potentially contribute around RM600mil and RM200mil to Genting Malaysia's revenue and profits, respectively, by 2013. This estimate was based on an assumption of a daily win per terminal of US$300.

An analyst tells StarBizWeek that the initial period of Resorts World New York's operations could still likely be plagued by some teething problems that could affect earnings contributions, but the longer-term prospects remain bright, and could potentially generate better-than-expected earnings like what the group's UK operations did recently.

Genting Malaysia's UK casino operations have started contributing to the group's revenue since the fourth quarter of last year. In its latest reported quarter, contributions from the UK business were surprisingly strong that they lifted the company's earnings above market expectations.

Genting Malaysia saw its net profit for 1QFY11 soared to RM417.7mil on revenue of RM1.95bil, compared with a net profit of RM272.3mil and revenue of RM1.35bil in the corresponding period last year.

In a statement, the group said it attributed its encouraging financial performance during the quarter in review partly to its UK casino operations, which generated a profit of RM60.1mil on revenue of RM346.6mil.

In the preceding quarter, Genting Malaysia's UK operations actually posted loss of RM2.1mil on a maiden revenue contribution of RM188.4mil to the group.

“The group's UK operations seemed to have turned around now, and we expect earnings from the operations there to continue improving in the coming quarters, albeit at a more volatile rate, considering the uncertainties surrounding the UK's economy,” an analyst says.

But what's more reassuring, as indicated by Genting Malaysia's first-quarter result, is the fact that the cannibalisation of market share, expected to result from the rising competition from the two new casinos in Singapore, did not seem to have happened at a scale that would significantly impact the company's existing casino and resort operations in Malaysia.

“The company's core operations in Malaysia remain resilient despite the competition from the two casinos in Singapore, and this trend will likely continue in the coming quarters,” the analyst explains.

Genting Malaysia's parent, Genting Bhd, holds a majority stake in the Resorts World Sentosa in Singapore, which happens to be the country's first casino resort.

Apart from a casino, the facility there houses the Universal Studios Singapore theme park, Marine Life Park, hotels and a host of other dining, shopping and entertainment offerings. The group's Singapore operations compete with the Marina Bay Sands casino resort built by Las Vegas Sands.

“Growth in Asia remains exciting for the industry, but in Malaysia, the market has already matured. Venturing abroad is the right option to diversify its business and avoid hitting a revenue plateau,” an analyst says.

Business Times - 12 Nov 2011

Genting S'pore slides on market-share losses

Its move to raise bad debt provisions in Q3 raises concerns about debt collections from VIP players in China

By GRACE LEONG

SHARES of Genting Singapore slid yesterday on its market-share losses and after its move to raise bad debt provisions sparked concerns over whether debt collections from VIP players in China - one of its biggest markets - may become more challenging as credit conditions there tighten.

Genting Singapore shares fell as much as 8.3 per cent in volatile trading yesterday, before closing at $1.595, down 5.34 per cent or nine cents.

In what Genting Singapore called a prudent move in the face of a slowing global economy and tightening credit conditions in China, the company raised its bad debt provisions to $56.9 million for the third quarter, up from $23.5 million a year ago.

That equates to 8.5 per cent of its gaming revenue, higher than the average of 3 per cent over the past six quarters, Citigroup said yesterday.

'However, this is in contrast to Marina Bay Sands, which has not shown higher provisioning, so we wonder if Genting Singapore's decision was driven by its aggressive credit extension that was seen in the first half of the year,' Macquarie Equities Research analysts Gary Pinge, Elaine Lai and Somesh Kumar Agarwal said in a report yesterday.

Also pressuring Genting Singapore's stock are concerns that its flagship casino, Resorts World Sentosa (RWS), continued to cede market share in both VIP and mass gaming segments to rival MBS.

'Genting Singapore lost significant gaming market share in 3Q11 and also did not see any ramp-up in non-gaming,' the Macquarie report said. 'We believe the VIP market share loss is more driven by lack of a competitive product relative to MBS.'

'We find it interesting that notwithstanding Genting Singapore adding more table game capacity, slots and electronic table games (ETGs) (quarter-on-quarter), mass market failed to ramp and showed 2 per cent QoQ growth. This essentially means that table, slot and ETG yields all declined QoQ - at a time when there was available hotel room capacity,' the Macquarie report said.

The scheduled opening of Bayfront MRT at MBS may also shift some mass-market players away from RWS, it said.

But it isn't all doom and gloom.

Some analysts say downside was capped by Genting Singapore's top management's renewed optimism on hopes that some of the junket licensing applications it endorsed may be approved in the next few months.

Also helping is the planned opening of the 200-luxury room Equarius hotel and 20-plus Beach Villas by year-end, which would triple RWS's VIP hotel offering to nearly 330 and help the casino claw back some VIP market share.

Morgan Stanley said RWS could see growth in its VIP roll as it ramps up the number of slot machines to 1,744 by year-end from its current 1,315.

With the resort's completion next year, RWS is expected to see a boost in operational performance in 2013.

'We believe Genting Singapore remains well-positioned to secure new gaming opportunities when they arise. Globally, governments are facing fiscal pressure and casinos remain an efficient policy tool for raising taxation revenues. We see Korea and Japan as key potential markets,' said HSBC analyst Sean Monaghan.

Aaron Fischer of CLSA Asia-Pacific Markets noted that Genting Singapore was 'especially optimistic on Japan and believes it could legalise gaming within the next 12 months'.

'This would be another major catalyst to the shares as we believe Genting Singapore, Las Vegas Sands and Wynn are the three front-runners for one of the two licences (which would probably be operated under a joint venture with a Japanese company,' he said.

Any buddies keen in casino stocks?

Genting SP has run up quite abit.

They will be releasing FY earnings soon which I expect it will not be better than MBS.

---

$1.40 to $1.50 has been a nice trading price to enter.

The Straits Times
Feb 29, 2012
Investors bite at bond offer by Genting S'pore
$1b to $2b could be raised with attractive coupon rate at 5 to 5.5%

By Goh Eng Yeow

Investors rushed to grab a slice of the perpetual bond offering from casino operator Genting Singapore yesterday.

While the firm is coy about how much it plans to raise, dealers say it could be from $1 billion to $2 billion - cash to boost the war chest for business expansion.

This could include plans to bid for a casino licence in Japan, where the green light for casinos is expected later this year.

Genting is paying an attractive coupon rate of around 5 per cent to 5.5 per cent, according to a term sheet sighted by The Straits Times, hence the keen interest among fund managers and well-heeled investors.

This would make its proposed payout comparable with the recent offering by Global Logistic Properties, but slightly lower than commodities firm Olam International's 7 per cent coupon rate.

One dealer said that her brokerage alone had attracted applications worth $200 million.

'The bonds offer investors a chance to ride on Genting's success as a casino operator without exposing them to the vagaries of the stock market. Some of my clients plan to switch from Genting shares to the bonds,' she said.

As its name implies, a perpetual bond has no maturity date. Genting is sweetening the offering by giving an undertaking that it will make all coupon payments, including those which may be in arrears, to bond holders before it declares any dividend payouts to ordinary shareholders.

If the firm does not redeem the bonds after 10 years, it will have to step up its coupon rate by another percentage point.

The only snag is that despite the huge size of the bond issue - easily one of the biggest this year - most retail investors will have to give the Genting bonds a miss. This is because minimum applications start at $250,000, and this puts the bonds out of reach of most retail investors.

Analysts note that what makes the Genting bonds so attractive to investors is the huge cash flow the company is enjoying from its casino at Resorts World Sentosa, which is attracting around 25,000 visitors daily since it opened two years ago.

'Genting is relatively debt-free compared with other casino operators. While it earns over $1 billion from its casino operations a year, it has only short-term debts of $446 million and long-term debts of $2.7 billion,' said OCBC Investment Research analyst Carey Wong.

A check with Bloomberg shows that rival casino operator Wynn Resorts has long-term debts of US$3.3 billion (S$4.2 billion), while Las Vegas Sands shoulders a debt burden of US$9.4 billion.

In its just-released full-year results, Genting reported that net profit jumped 55 per cent to $1.01 billion last year. For the fourth quarter alone, net profit rose 180 per cent to $254 million.

That means that even if it sells $2 billion in bonds, it will have no problems shelling out up to $110 million in coupon payments, if profits continue to exceed $1 billion a year.

In a move to capture the Chinese- speaking investor, the offer document has a Chinese version in addition to the English text. The roadshow is heading to Malaysia and Hong Kong in a bid to tap investor interest outside Singapore.

The confidence Genting has in its future was underlined by its decision to pay out a maiden dividend of one cent as it whittles down the debts incurred in building the Sentosa resort.

In recent write-ups, Citi Investment Research and Morgan Stanley described the dividend move as 'positive'.

Genting ended flat at $1.59 yesterday, with 83.65 million shares traded.

engyeow@sph.com.sg

Understand this bond issue can be bought OTC
Pricing is not fixed; it's will not be listed.
Price can also go down or go up.
Such bonds are bought by insurance companies? High returns but pay out miserable yields to policy holders? As a form of hedging?
Can casinos remain lucrative biz even when times are bad???
5% - 5.5% returns looks good.
If buy stocks, need to constantly monitor the market, lots of work/time involved.
Sometimes got rights issue, got to come out some more money, putting good money into bad money.
At the end of the day, some companies can make it, but some can also go bust, except for blue chips.
For bonds, the returns is net net, not so much monitoring.
Honestly nowadays 250K can only buy a roof or 1 side of a wall?

Anyone has a deeper knowledge on investment in bonds?
What are the risks involved?
If company go bust, what will happen to bond holders as compared to shareholders? If everything is so scared, there is nothing to invest?

Quote from article:

1) Genting is paying an attractive coupon rate of around 5 per cent to 5.5 per cent

2) Genting is relatively debt-free compared with other casino operators

3) If the firm does not redeem the bonds after 10 years, it will have to step up its coupon rate by another percentage point.

4) As its name implies, a perpetual bond has no maturity date. Genting is sweetening the offering by giving an undertaking that it will make all coupon payments, including those which may be in arrears, to bond holders before it declares any dividend payouts to ordinary shareholders.

Won't claim to be a bond expert...but to answer your questions first
1) two broad areas of bond risk- interest rate (higher the market interest rate, the lower the price for a fixed rate bond) and credit risk (the riskier the company, the lower the price of the bond)
2) If the company goes bust, the assets of the company will have to be liquidated to repay the creditors and anything remaining will be repaid to the company's shareholders. In Genting's case, this corporate perpetual is ranked just above equity and below that of secured debt and unsecured debt (note that a large amount of the loans on their books are secured against the assets in the bank- quoted below. Thus, in an event of liquidation, these have to be repaid first before payments are made to senior unsecured creditors and those ranked below it)
3) In addition to that, for genting's perpetual, the firm has the right to defer coupons at their sole discretion. The coupons do cumulate until the point that they are repaid again but honestly, if a firm has to defer coupons on such instruments, they are usually in dire straits. On point no. 4 above, I wouldn't look at it as a sweetener as Genting perpetual is missing a common feature where coupons have to be paid to perpetual bond investors should dividends be paid to common shareholders (commonly referred to as a "dividend pusher").

On whether this is of good value to investors, lets look at it from a flipside - how does it look for the company? The loans of the company cost them 3% at the higher end in 2010. However, this is for a dated loan, with the maximum maturity of about 6 years (i'm assuming that the loan cost is a result of their 7-yr loan facility). The difference between 20 year SGS and 5 year SGS is almost 1.8% (available on SGS website). Thus, the minimum cost for a senior loan (assuming unsecured) for a 20 year tenor has to be at least 4.8%. This subordinated issue will cost the company only 5-odd% for 10 years and a maximum of 6-odd% for the rest of its life.
Instead of having to pledge assets to the bank or even to take senior loans from a bank with all the covenants that banks put on the company, run the risk of default if i can't pay the interest to the bank, I can now (1) take the monies from investors for a maximum of 1-odd% more in interest cost per annum, (2) have a choice of not even paying them the interest when i don't want to and (3) wow, i don't even have to return the money ever!
hmmm......in the bonds world, what is good for the company is rarely ever good for the investor...

Take it in a different light, Genting has a capital structure of roughly
6bn equity
3bn debt
9bn total assets.

net income per annum of about 1bn,
giving a ROE of about 16.7%

Post this subordinated issue- assuming roughly a 1bn size. On an accounting basis lets assume that it qualifies as equity. Also, lets assume that the company maintains the same capital ratio of debt to total assets (~ 1/3). One more wild assumption that to maintain the same ratio, they pay out that excess 1bn in dividends (THIS IS AN ASSUMPTION, not a view that they will pay dividends!!!) The balance sheet would be

5bn - equity
1bn - subordinated issue
3bn - debt

Assume still that they continue to earn 1bn per annum. However, that 1bn sub issue incurs an annual interest cost of 5+%, Thus the new income is
1bn - (5.5% * 1bn) = 945mn
The ROE is now 945/5000 = 20%

Excellent deal for the parent company- AND any common equity investor!

Of course I am not suggesting that they will pay a massive dividend out. The more likely scenario which Tan Sri Lim alluded to is that the cash hoard they have of roughly 3.4bn plus any that they raise here is going to be invested in some new project...quoting from their press release below.....

Tan Sri Lim said, “Genting Singapore is at a green shoot stage by any standard. It is a growth
stock. However, this is a gesture of our appreciation to shareholders for their support.
"With RWS nearing completion and preparing for its Grand Opening this year, our shareholders
are asking „what next?‟ I‟d just say that we are continuing to look at strategic investments to
grow the company.”

If you like Genting's Singapore casino and you have the confidence that they are going to invest that cash they have raised wisely, buy the equity, why would you want to be paid only 5+% (ok make that 6+% after 10 years) for taking essentially the same credit risk as a common shareholder? I am neither vested nor am I recommending readers to invest in Genting shares...

(01-03-2012, 10:29 PM)bran Wrote: Won't claim to be a bond expert...but to answer your questions first
1) two broad areas of bond risk- interest rate (higher the market interest rate, the lower the price for a fixed rate bond) and credit risk (the riskier the company, the lower the price of the bond)
2) If the company goes bust, the assets of the company will have to be liquidated to repay the creditors and anything remaining will be repaid to the company's shareholders. In Genting's case, this corporate perpetual is ranked just above equity and below that of secured debt and unsecured debt (note that a large amount of the loans on their books are secured against the assets in the bank- quoted below. Thus, in an event of liquidation, these have to be repaid first before payments are made to senior unsecured creditors and those ranked below it)
3) In addition to that, for genting's perpetual, the firm has the right to defer coupons at their sole discretion. The coupons do cumulate until the point that they are repaid again but honestly, if a firm has to defer coupons on such instruments, they are usually in dire straits. On point no. 4 above, I wouldn't look at it as a sweetener as Genting perpetual is missing a common feature where coupons have to be paid to perpetual bond investors should dividends be paid to common shareholders (commonly referred to as a "dividend pusher").

On whether this is of good value to investors, lets look at it from a flipside - how does it look for the company? The loans of the company cost them 3% at the higher end in 2010. However, this is for a dated loan, with the maximum maturity of about 6 years (i'm assuming that the loan cost is a result of their 7-yr loan facility). The difference between 20 year SGS and 5 year SGS is almost 1.8% (available on SGS website). Thus, the minimum cost for a senior loan (assuming unsecured) for a 20 year tenor has to be at least 4.8%. This subordinated issue will cost the company only 5-odd% for 10 years and a maximum of 6-odd% for the rest of its life.
Instead of having to pledge assets to the bank or even to take senior loans from a bank with all the covenants that banks put on the company, run the risk of default if i can't pay the interest to the bank, I can now (1) take the monies from investors for a maximum of 1-odd% more in interest cost per annum, (2) have a choice of not even paying them the interest when i don't want to and (3) wow, i don't even have to return the money ever!
hmmm......in the bonds world, what is good for the company is rarely ever good for the investor...

Take it in a different light, Genting has a capital structure of roughly
6bn equity
3bn debt
9bn total assets.

net income per annum of about 1bn,
giving a ROE of about 16.7%

Post this subordinated issue- assuming roughly a 1bn size. On an accounting basis lets assume that it qualifies as equity. Also, lets assume that the company maintains the same capital ratio of debt to total assets (~ 1/3). One more wild assumption that to maintain the same ratio, they pay out that excess 1bn in dividends (THIS IS AN ASSUMPTION, not a view that they will pay dividends!!!) The balance sheet would be

5bn - equity
1bn - subordinated issue
3bn - debt

Assume still that they continue to earn 1bn per annum. However, that 1bn sub issue incurs an annual interest cost of 5+%, Thus the new income is
1bn - (5.5% * 1bn) = 945mn
The ROE is now 945/5000 = 20%

Excellent deal for the parent company- AND any common equity investor!

Of course I am not suggesting that they will pay a massive dividend out. The more likely scenario which Tan Sri Lim alluded to is that the cash hoard they have of roughly 3.4bn plus any that they raise here is going to be invested in some new project...quoting from their press release below.....

Tan Sri Lim said, “Genting Singapore is at a green shoot stage by any standard. It is a growth
stock. However, this is a gesture of our appreciation to shareholders for their support.
"With RWS nearing completion and preparing for its Grand Opening this year, our shareholders
are asking „what next?‟ I‟d just say that we are continuing to look at strategic investments to
grow the company.”

If you like Genting's Singapore casino and you have the confidence that they are going to invest that cash they have raised wisely, buy the equity, why would you want to be paid only 5+% (ok make that 6+% after 10 years) for taking essentially the same credit risk as a common shareholder? I am neither vested nor am I recommending readers to invest in Genting shares...

Bran,Thank you so much for replying to my post. It was a well written piece, and it must have taken you quite abit of your time and effort. It really took me quite awhile to try to digest what you had written. I read and re-read a few times. (I know nuts about econs and finance, but I do have some common sense lah.)

You highlighted many important points and I seriously consider them becos I feel they are all valid points. I guess I have a better understanding of the issue so I have decided not to go for it after thinking deep and hard.

But then again, if the local banks do issue perps in future, I may consider. I was thinking MAS cannot afford to allow bank run in Sg, right? That should be a back-up, so I guess it’s safer.

But if really bank run, wonder if perps come before deposit insurance or what?
You know after all those Lehman Brothers and mini bonds and Madoff issues, really don’t know what will be next? Imagination just run wild!

Can casinos really sustain the very good earnings year after year? It appears that casinos is the ‘in’ thing now in Singapore. Wealthy people visit the casinos for some kind of leisure or socialize, the not so rich people also join in with the hope of winning big…

In this regard, I remind myself: Gambling is not a ‘need’; it is a ‘want’.

Actually my reasons for want to subscribe to this perps:
1) Higher yield, meaning much better than fd, and SGS bonds
2) Money lock in for longer term, no need to worry where and what to invest when it matures.
3) Don’t really like shares too much, a lot of work and time involved in monitoring = plain lazy and also don’t know how to analyse annual reports.

Most forumers here appear to be more into equities. I guess to them stocks are more interesting and challenging. Some stocks can turn into multi-baggers, or give special dividends, etc. Bonds on the other hand, just give out fixed yields, nothing to be excited about. Besides SGS bonds, other types of bonds may not be so 100% principle guaranteed.

So at the end of the day, it's higher risk = higher return, lower risk - lower return.

Business Times - 10 Apr 2012

Genting S'pore makes another perpetual offer

$500m issue targets retail investors, size may be raised by another $200m

By GRACE LEONG

FRESH from its first successful $1.8 billion offering of perpetual securities - the largest-ever single-tranche Singapore-dollar bond deal - Genting Singapore is now targeting retail investors with a perpetual issue of $500 million.

This latest issue, which can be increased by another $200 million if the offer is oversubscribed, targets retail investors that were left out of Genting's institutional perpetual offering in late February as minimum applications started at a hefty $250,000.

For the second tranche, minimum applications start at $5,000, and investors can subscribe in lots of $1,000 above that, the company announced yesterday.

Proceeds will be used to fund acquisitions and to invest in new projects to grow Genting Singapore's gambling and hospitality business in Asia.

'This is the first time a corporate is offering such an investment to retail investors, and there's a lot of demand for such investments because interest rates are currently very low,' Lee Shi Ruh, the company's chief financial officer, said yesterday.

The notes will pay a 5.125 per cent annual coupon twice a year until October 2022, and 6.125 per cent after that, with the company having the option to redeem the securities in 2017.

'It will strengthen our balance sheet position because we will have more cash in our balance sheet (post the issue) while our long-term borrowings remain the same as the securities will be recorded as equity on the balance sheet,' Ms Lee said.

The public offer opens at 9am today and will close at noon on April 16, and the securities will be traded on the Singapore Exchange. The securities are open for public subscription by way of ATMs belonging to DBS, OCBC, UOB as well as their Internet banking websites and DBS' mobile banking platform.

Unlike the first tranche, the retail perpetual offering is marketed exclusively in Singapore. DBS is the sole global coordinator on the offer and DBS and OCBC are joint lead managers.

'Genting is a strong household name. The investment grade-rating on the issuer and securities should give comfort on the issuer's credit worthiness. The third draw is the interest yield,' said Clifford Lee, head of DBS fixed income.

The company has been accorded a credit rating of Baa1 by Moody's and A- by Fitch Ratings. Its perpetual securities have been rated Baa3 by Moody's and BBB by Fitch.

Given these draw factors, Mr Lee said he is eager to see how this latest offering will be received by retail investors.

'This offering will definitively test the retail market for this type of perpetual bond,' he said.

Carey Wong, an analyst with OCBC Investment Research, said that the second offering will further boost Genting Singapore's growing cash hoard for potential overseas investments.

While the company doesn't have immediate investment plans, Ms Lee said that the fund raising was done to position Genting for any opportunities that may arise.

'If it is Japan or Korea, it would likely be greenfield projects,' Ms Lee said. 'Genting Singapore is well positioned for opportunities such as those in Japan or in Korea. Looking at the way that the country (Japan) is looking at, it will be very similar to what Singapore has introduced - big sized integrated resort, with the main aim to increase tourism arrivals.'

She said that the proceeds will be used only by Genting Singapore and its subsidiaries, and not by Genting Malaysia.

While this is a relatively attractive investment opportunity for retail investors, Gan Kok Kim, head of Group Investment Banking, OCBC Bank, pointed out that they should be aware that such investments carry some risks.

For one thing, payment of coupons on the securities may not be made on a distribution payment date. The issuer may, at its sole discretion and subject to certain conditions, elect to defer any scheduled payout on the securities for any period of time, he said.

Another risk is that investors could lose all or part of their investment in the securities if the issuer is liquidated, dissolved or wound up, Mr Gan said.

Finally, the price of the securities may fluctuate depending on the prevailing market conditions, including interest rate as well as the credit standing of the issuer, or the market for the securities may not be sufficiently liquid or active. This being so, the securities may trade lower than the initial issue price and investors may suffer a loss, he said.