Genting Bhd - 1MDB buying Genting Sanyen?

By Kenanga Research
10 August 2012

Outperform
Price: RM9.02
Target Price: RM11.69

News:
- It was reported in the Business Times today that 1 Malaysia Development Bhd (1MDB) is buying
Genting Sanyen from Genting group for RM3.0b-RM3.5b.
- The source quoted said the deal is reaching its final stage and will be announced soon.



Comments:
- This comes as a surprise to us given that the company has won the bid last month to build a
USD1.0b greenfield 660MW coal-fired power plant in Indonesia.
- At this juncture, it is not clear if the deal involves only the Malaysian asset or overseas IPPs.
Judging from the price tag, we believe the deal, if materializes, would involve all power assets
except the upcoming Indonesia IPP.
- Note that besides Malaysia and the new upcoming plant in Indonesia, Genting has two
other power assets in India and four others in China.
- In our SOP, we value the Malaysian asset at RM529m as its PPA is coming to an end in 2015.
The non-Malaysian IPP (ex-Indonesia new plant) is worth RM2.17b. As such, the price tag of the
reported RM3b-RM3.5b is a good deal.
- On the overall, we are positive if the deal materializes as it will  allow the group to better
focus on its core gaming operations.

Outlook:
- The possible disposal of its power assets will potentially reduce GENTING’s FY13E earnings by
c.8% but will add RM0.08-RM0.22/SOP share to our valuation.

Forecast:
- No changes to our estimates.

Rating: MAINTAIN OUTPERFORM

Valuation:
- We are maintaining our target price of
RM11.69/share based on a 10% holding
company discount to its SOP.

Risks:
- Risks to our call are 1) poor luck factor and 2) a
substantial decline in CPO prices.

[Source]