KUALA LUMPUR (Oct 16): Shares of Genting Bhd (KL:GENTING) extended gains to a seven-month high on improved prospects over a New York gaming licence being bid by its takeover target Genting Malaysia Bhd (GenM)(KL:GENM).
Genting shares rose more than 5% on Thursday's morning trade, as trading volume surged six-fold its 200-day average to 45.69 million shares.
In total, Genting shares have climbed nearly 24% this week since the announcement of the RM6.7 billion takeover offer for the 49%-owned GenM.
GenM's Downstate New York casino licence is "nearly in the bag", CIMB Securities said in a note, as one of its three contenders, MGM Empire City, reportedly withdrew its application.
The casino is part of GenM's planned US$5.5 billion (RM23.19 billion) resort development in Queens. Analysts estimate that the NY licence win could boost GenM's value by more than 40 sen per share.
"While it is still possible the Gaming Commission may issue less than three licences (or even none, although we think this is highly unlikely), the chances of RWNYC (Resorts World New York City) securing a licence are now very high, in our view," CIMB Securities said.
The optimism spills over to Genting shares, even as analysts point out that the privatisation would dilute earnings per share of Genting shareholders, due to the higher valuation ascribed to GenM versus its pre-pandemic average.
At its last share price, Genting was trading at 16.3 times forward consensus earnings, compared with its 10-year average of 19.8 times. It is still down over 8% year to date.
Among 15 analysts covering the stock, nine have "buy" calls and six have "hold" calls on the stock, with an average target price of RM3.48, compared with its last trading price of RM3.53 at the time of writing.
The group plans to privatise GenM and intends to go for compulsory acquisition of remaining shares, should it secure 90% or more in acceptances.
Over at GenM, while some view that the stock is undervalued relative to Genting's offer, the stock hovered at just RM2.34, near the offer price of RM2.35 per share. It was trading at RM2.14 prior to the announcement.
The offer values GenM at RM13.9 billion, and about 9.13 times enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/Ebitda).
The privatisation, if successful, would mark the exit of a company listed on the Malaysian stock exchange nearly four decades ago.
Genting Malaysia, listed on Bursa since 1989, holds the group’s flagship Resort World Genting that draws tens of millions of visitors to the hilltop facilities annually.
The company also operates the group’s major US and UK operations, and a small casino in Egypt.