Genting Malaysia - NCL files for IPO again Buy

- According to Bloomberg, Norwegian Cruise Lines (NCL), which is 50%-owned by Genting Hong Kong Ltd, has filed for an initial public offering (IPO). 

- Genting Hong Kong used to own 100% of NCL before selling a 50% stake to Apollo Global Management and TPG in 2008. 

- NCL’s previous filing for an IPO in 2010 was scrapped.  

- Genting Hong Kong is estimated to be 18.8%-owned by Genting Malaysia Bhd (GenM). 

- NCL is expected to raise proceeds of US$424mil, which would be used to repay borrowings. According to Bloomberg, NCL would be offering about 12% of its shares in the IPO. 

- Based on the market capitalisation of US$3.5bil and NCL’s annualised FY12F net profit of US$223mil, NCL’s FY12F PE would be roughly 15.8x. 

- In comparison, Royal Caribbean and Carnival Corp’s FY12F PEs are between 18x and 20x. The two cruise companies’ PEs are expected to decline to 13x to 15x in FY13F.  

- NCL reported a net profit of US$167.5mil in 9MFY12 on the back of revenue of US$1.7bil. EBITDA margin was at 26% in 9MFY12 versus 24% in 9MFY11. 

- There is no impact on GenM as its shareholding in Genting Hong Kong is only an investment stake. GenM does not even equity-account Genting Hong Kong’s earnings. 

- However, the listing of NCL would give a market value to NCL’s assets. 

- The listing would allow Genting Hong Kong an option to sell its shares in NCL in the open market, if it chooses to. 

- We maintain a BUY recommendation on GenM for its resilient gaming earnings in Malaysia and New York. GenM’s risk comes in the form of volatile earnings in its UK gaming division.  

Source: AmeSecurities