Genting Singapore

The Business Times
Published April 10, 2012

Genting's institutional perps edging down

By SIOW LI SEN

AS retail investors look forward to Genting Singapore's $500 million issue of perpetuals securities, the price for its institutional offer sold last month continued to slide.

Dealers said Genting's mega $1.8 billion perpetuals sold to institutional investors at $250,000 a pop in early March is suffering from an overhang.

'There's an overhang, people didn't expect them to issue so much, so there's a bit of worry,' said one dealer.

Genting's $1.8 billion perpetual issue was the largest debt ever sold in Singapore and eclipsed DBS Bank's $1.7 billion deal in October 2010.

Yesterday, the perpetuals which also came with a 5.125 per cent coupon was quoted at $99.10-$100.10, down from $99.35-$100.25 last Thursday. At $99.10, the yield would have risen to 5.237 per cent as bond prices and yields move in opposite directions.

For those who bought at the launch and paid about $100.25, the loss would be a net 70 cents after including the 31 days of accrued interest, said a product executive.

Some market watchers hope that the retail offering will help push up the institutional price.

Generally, retail bond offerings have been few and far between and the pent-up demand from the small investors for these high yield instruments has led to their trading at much higher prices compared with their institutional cousin.

For instance, DBS' retail 4.7 per cent perpetual trades at almost $2.70 higher than its institutional tranche.

'There is only a few issues for retail, while there is a whole spectrum of bonds for the institutional investors,' said the executive.

Some institutional investors may be tempted to exit their earlier investment and try to buy the retail offering but, if demand is strong, they risk not getting any, said the executive.

The Straits Times
Apr 11, 2012
Genting may be a sure bet but know risks of perpetual bonds
Bonds have no fixed redemption date and rising interest rates can push prices down

By Jonathan Kwok

GENTING Singapore's announcement on Monday that it is offering retail investors the chance to participate in a $500 million perpetual bond issue is certain to be welcomed by some.

For one thing, any product with a Genting Singapore name is often seen to be a sure bet by retail investors.

For another, the investors were probably disappointed when Genting raised $1.8 billion from sophisticated investors just last month, leaving them out in the cold.

At a time when property investors are wary of more cooling measures and the share market is vulnerable to fresh fears over the economies of the United States, Europe and China, the issue offering a yield of 5.125 per cent sounds very attractive. In fact, the distribution rate will rise to 6.125 per cent after 101/2 years.

This is especially so as fixed deposit rates are still low, often lower than 1 per cent. Genting's return also beats the current inflation rate, which came in at 4.6 per cent in February.

As Mr Gan Kok Kim, head of group investment banking at OCBC Bank, which is the joint lead manager and bookrunner for the issue, pointed out, the payout rate 'is quite attractive in the current low interest rate environment'.

Perpetual bonds, or perpetual securities, are similar to preference shares, which pay out a regular interest coupon. These instruments are traditionally seen as fairly safe investments.

But retail investors need to bear in mind certain risks of such perpetual securities.

They should note that there is no fixed date for the redemption - when the company will return the initial investment back to the holder.

If they wish to get their capital back, they will have to sell their bonds on the open market, but the spread or difference between the buying and the selling price is likely to be fairly large.

Another risk is that Genting may fail to make its regular payouts. In fact, the company may choose to defer payouts for any period of time.

Still, the distributions are cumulative, which means investors are entitled to any missed distributions, plus interest on those payments, during a future payout.

But the chances of Genting being unable to pay are not high. Its Resorts World Sentosa attracted about 25,000 visitors daily to make $1.67 billion in operating profit last year.

It is likely to have cash to spare, even after paying out almost $120 million every year to bond-holders of both its institutional and retail issues.

In Genting's case, its perpetual bond also comes with a rating. It is rated BBB by Fitch Ratings, the lowest rating to be considered investment-grade, while the issuer Genting Singapore has a stronger rating of A- which puts it more comfortably in the investment grade.

Genting Singapore is also rated Baa1 by Moody's, which is also considered investment grade.

However, investors should take note of the possibility of rising interest rates, which will push bond prices down as investors switch out of bonds to park their cash elsewhere like in a bank. A fall in the bond price below par value may erode one's investment, if one chooses to sell the securities on the open market.

Prices of longer-tenure bonds are more sensitive to interest rates than bonds with shorter tenures. Since perpetual bonds can have almost an unlimited tenure if the issuer chooses not to redeem them, they can be considered to be at the highest risk.

The United States Federal Reserve has pledged to keep its benchmark rate low till at least late 2014, but what happens beyond that is anybody's guess.

Investors will need to decide if the initial 5.125 per cent payout is enough to compensate them for the risk of higher rates in future.

jonkwok@sph.com.sg

The Business Times
Published April 18, 2012
Genting S'pore's 2nd perpetual securities offer also oversubscribed
By Lee U-wen

JUST like its first offering of perpetual securities last month, Genting Singapore's second tranche - this time targeting retail investors - also ended up being oversubscribed.

The integrated resort operator announced that the week-long public offer, which closed yesterday at noon, attracted just over $734 million in valid applications - nearly 50 per cent higher than the $500 million it had intended to raise.

Its first $1.8 billion offering of perpetual securities - the largest-ever single-tranche Singapore-dollar bond deal - last month saw demand reach $6 billion.

In a statement to the Singapore Exchange yesterday, Genting Singapore said that it had decided that the final size of this latest issue would be $500 million.

Genting chose not to exercise its option to increase the issue by another $200 million in the event of the offer being oversubscribed.

The $500 million was allocated as follows: $496.986 million at par in a public offer, and $3.014 million at par in a reserve offer.

To maximise the participation of retail investors under the public offer, Genting, in consultation with the joint lead managers, also decided that all applicants who submitted valid applications for the securities under the public offer will be allocated all or a proportion of the securities for which they have applied for.

This second perpetual securities offering was meant to target retail investors frozen out by the first round as minimum applications then started at $250,000. This second tranche had a minimum application of $5,000, with investors able to subscribe in lots of $1,000 above that.

The $500 million raised will go towards funding acquisitions and to invest in new projects to grow Genting Singapore's gambling and hospitality business in Asia.

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.

The securities are expected to be issued today and trading will commence tomorrow at 9am, subject to the Singapore Exchange giving the green light.

The Straits Times
Apr 25, 2012
companies
Shareholders air concerns at Genting AGM
Firm allays fears about its ability to pay interest on $2.3b fund-raising effort

By Goh Eng Yeow

ANXIOUS shareholders of casino giant Genting Singapore yesterday expressed fears over the firm's ability to service the huge interest payments resulting from a recent $2.3 billion fund-raising exercise.

The move dominated questions from the hundreds of shareholders who turned up at the firm's annual general meeting (AGM) held in the luxurious ballroom in Genting's flagship Resorts World Sentosa.

The firm sold a bond-like instrument known as perpetual shares to raise the funds. It is paying a hefty annual payout or coupon of 5.125 per cent.

One after another, shareholders stood up to voice their concerns at the meeting, which lasted for two hours.

One elderly shareholder asked company chairman Lim Kok Thay if Genting would be deferring any payout on the perpetual securities - which give the issuer discretion over repayment of the principal and the ability to defer coupon payments under certain circumstances.

Another shareholder asked if the company's decision to pay out a measly one-cent dividend was to make the perpetual bonds attractive to buyers, since it offered a much higher payout rate in percentage terms than the shares.

But Mr Lim took pains to allay their fears. He said: 'Your board and management are highly confident we can honour all our obligations. Please don't start talking about defaults. We are not a fly-by-night company. In a short span of time, we have grown tremendously. You can see you are the owner of every single brick in this resort.'

He noted that Genting had been given high ratings by credit ratings agencies. 'We have the best credit ratings of any gaming companies in the world, and that includes whatever the American operators can come up with. They are rated as junk. We are investment grade. I can assure you. Please sleep well at night.'

The perpetual securities had been a 'rare win-win situation' for both the company and the investors who bought them. 'It is very rare for both sides to win. We give them very good interest - 5.125 per cent - compared with bank interest which is below 1 per cent,' he said.

In the financial year ended Dec 31 last year, Genting had reported a net profit of $1 billion, revenues of $3.2 billion and borrowings of about $3.15 billion. It is one of Singapore's largest listed firms with a market value of $21 billion and more than 94,000 shareholders.

Mr Lim also expressed confidence that with the cash in hand, the company could capitalise on any opportunities that may arise. 'I can sleep soundly at night, knowing that with the cash we have, we will definitely be able to earn more than the 5.125 per cent which is the interest cost we pay for this sum of money,' he said.

One shareholder wanted to know why Genting is raising so much money when it had no acquisition target in mind, and yet was paying hefty interest on the funds.

Genting president Tan Hee Teck said: 'They want to see the colour of your money. Let's say hypothetically I want to build an IR (integrated resort) in Japan, the first thing the Japanese government is going to ask you - I say in Hokkien - would be 'Oo lui boh?' (Got money or not?). You can't say that I will raise some money down the road.'

A shareholder, who called himself Mr Toh, complained about the proposed one-cent dividend payout. He used a Hokkien expression to suggest that the company must be thinking that one cent is bigger than a bullock-cart wheel.

But Mr Lim noted that there was nothing shameful about the one-cent dividend. 'That one-cent dividend works out to $120 million of your money - $120 million is what this company is paying out as dividend. I am sure if you are embarrassed about it, there will be some charity bodies which will be quite happy to receive your one-cent payout,' he said.

After the meeting ended, each shareholder was given a lunch box to take away.

engyeow@sph.com.sg

Did a simple fcfe projection until 2014 of high capex to build aquarium and etc and subsequent steady state capex of 5% of revenue (which is high compared of Stanley Ho 1% of revenue) with 8% discount rate and I got about valuation of 88cents minus LT borrowings of 22c, my fcfe per share is 66cents. Therefore genting still has a long way to fall from PE of 17 before reaching a fair value. Lol

*Please visit the website for the full article.

Looks like the market may have already priced in this performance!

The Straits Times
www.straitstimes.com
Published on Aug 11, 2012
Genting profits drop 43% in 2nd quarter

By Ng Kai Ling

HIGHER expenses and lower gaming revenue dragged down Genting Singapore's net profit drastically during the second quarter.

The group's net profit fell to $138.5 million for the three months ended June 30, down 43 per cent compared with the corresponding period last year.

Even though net revenue fell just 3 per cent to $702.2 million, profits were hit by pre-opening expenses for Resorts World Sentosa's (RWS) West Zone, which is expected to open by the end of the year.

In a conference call yesterday, the president and chief operating officer of Genting Singapore and RWS' chief executive, Mr Tan Hee Teck, said expenses rose because some 1,300 new employees were hired and because the aquarium at the upcoming Marine Life Park is expensive to run.

He said the group's bottom line would be similarly affected by these expenses over the next few months.

"For the next two quarters, we will continue to have these expenses, but no revenue."

He said the company's financials should reach a steady state by the second quarter of next year, when revenue from the West Zone starts coming in.

In addition, profits were hit by a 4 per cent fall in gaming revenue to $562.3 million.

Mr Tan said one reason for the fall was the economic slowdown in China, which is one of the casino's top five markets in terms of international gamblers.

Analysts see the fall in gaming revenue at RWS as further confirmation that Singapore's gaming market has matured.

Marina Bay Sands (MBS) experienced a similar decline in the second quarter when its gaming revenue fell 7.5 per cent to US$550.2 million (S$689.7 million).

The gaming market here is split almost down the middle, with RWS taking 49 per cent and MBS 51 per cent.

"It seems like the market has reached a steady state," said Bank of America Merrill Lynch gaming analyst Melvyn Boey.

RWS made $313.1 million in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) last quarter, against MBS' US$330.4 million.
-----------------------

(25-04-2012, 07:30 AM)Musicwhiz Wrote: The Straits Times
Apr 25, 2012
companies
Shareholders air concerns at Genting AGM
Firm allays fears about its ability to pay interest on $2.3b fund-raising effort

But Mr Lim noted that there was nothing shameful about the one-cent dividend. 'That one-cent dividend works out to $120 million of your money - $120 million is what this company is paying out as dividend. I am sure if you are embarrassed about it, there will be some charity bodies which will be quite happy to receive your one-cent payout,' he said.


engyeow@sph.com.sg

This tell me there is too much shares out there if 1 cent can result in $120M based ref. dividend yield or the Price has to be adjusted to reflect the wheel Cart's Earning.
Looks like is the later.

When management talk about absolute number instead of yield ratio, i got curious...

Cory

2Q alone, Genting Singapore invested more than 1 billion in available-for-sale financial assets.

What have they bought besides Echo Entertainment(33 million share, less than 200 million)?

---

looking through its usage of money it raised through its rights and recent capital securities, it still have 1.1 billion left from its right issue in 2009 and 1 billion left from its recent capital securities, plus more than 1 billion available-for-sale financial assets. What's the plan for these cash?

(11-08-2012, 08:57 AM)freedom Wrote: 2Q alone, Genting Singapore invested more than 1 billion in available-for-sale financial assets.

What have they bought besides Echo Entertainment(33 million share, less than 200 million)?

---

looking through its usage of money it raised through its rights and recent capital securities, it still have 1.1 billion left from its right issue in 2009 and 1 billion left from its recent capital securities, plus more than 1 billion available-for-sale financial assets. What's the plan for these cash?

From Q2 Financials,


NCA : Available-for-sale financial assets = $916,662,000
CA : Available-for-sale financial assets = $317,844,000

Pg 16 : During the financial period ended 30 June 2012, the Group invested in a portfolio of quoted securities, unquoted equity investment and compounded financial instruments amounting to S$1,148.9 million.


From Yahoo News,

Genting, whose main asset is the Resorts World at Sentosa casino complex in Singapore, on Wednesday said it had bought listed securities and that the value of its quoted investments had risen to S$298 million from S$283 million.

It did not identify the firms in its portfolio.

Genting, which recently raised S$2.3 billion ($1.80 billion)through an issue of perpetual securities, said last month that it was on the lookout for new projects to expand its business.


Looks like the bulk of investments are still in unquoted equity investment and compounded financial instruments. Something to help them pay the 5.125% Perps interest while they look for new projects to expand their business?

The last news i recalled was Genting will invest into Philippines and Vietnam.

It sound worrying that Genting is investing heavily in stock market with its cash reserve. Do Genting skillful in stock investment? I believe stock investment should not be a competency of Genting, isn't it?

my 2 cts

(not vested)