News It was reported in the Business Times today
that 1 Malaysia Development Bhd (1MDB) is buying Genting Sanyen from Genting
group for RM3b-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 materialises, 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 materialises 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: Kenanga
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