Genting raises second perpetual bonds

DBS reports that the company is raising its second perpetual bonds of up to S$700m.

It is also expected to do well with the four times over subcription for GENS’ first perpetual bond issue of S$1.8bn in early March 12.

Here's more from the DBS report:

GENS’ will need to fork out an additional S$36m p.a., bringing total payments for both perpetual bonds to S$128m p.a. or 8% of 2013F earnings. This may be mitigated by stronger VIP growth should more junket licences be issued (especially to junkets based in China and new markets yet to be penetrated). Minimal impact on net gearing as perpetual bonds are classified as equity.

Given the expected completion of RWS by 4Q12, GENS is looking for new ventures outside Singapore within the next 18-24 months with potential US$0.5-3.4bn of equity investment (US$1.5-10bn capex, assuming 2/3 debt financing). We see Japan as the most interesting given its large size (based on existing pachinko market), global tourism appeal, and ready infrastructure – albeit a long and complicated legislative process to liberalise gaming. GENS will unlikely be interested in Korea if existing restriction on locals gambling in casinos remains (Kangwon Land’s exclusive domestic casino operation rights was recently extended by another 10 years to 2025, but Korea may liberalise after Japan in order to protect its market share). GENS is now the only vehicle within Genting Group with spare cash for new ventures as GENM is pre-occupied with RWNY Phase 2 and RWMiami. While competition will likely be intense, we fancy GENS’ chances given its strong balance sheet, healthy operating cashflows (US$1.1b p.a.), and strong track record with global reach.

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