Lim family sells Genting Singapore stake for RM1.5b

SINGAPORE, May 28 — The family which owns the Malaysian gaming firm Genting has stunned the market by selling its entire stake in the Singapore unit for S$615 million (RM1.5 billion). Investors got wind of the surprise sale early yesterday morning and swiftly dumped Genting Singapore stock to send the price into its biggest one-day fall in seven years.

Genting Singapore – it is building the Sentosa integrated resort – announced the deal during the mid-day trading halt in response to a Singapore Exchange query about the stock’s substantial trading volume.

The Lim family’s 9 per cent holding in Genting Singapore – or about 854 million shares – was offloaded to institutions in a private placement.

Their stake was being offered at 72 cents to 76 cents a share and was eventually placed out at about 72 cents. That represents a 16 per cent discount to Tuesday’s closing price of 86.5 cents.

Even after the sale, the Lim family will remain in control of Genting Singapore via its Kuala Lumpur-listed flagship firm, Genting Bhd.

Speculation is rife over the sudden move by the Lims to divest their stake. One suggestion is that the family simply wanted to cash in following the stock’s 70 per cent surge since March.

“The share price has outperformed, so it is a good time to lock in gains,” said an industry observer who requested anonymity. “Even at 72 cents, the share price is considered overvalued.’

The stock opened sharply lower at the opening bell, and the selling gathered pace over the next 20 minutes, with the stock plunging by as much as 21 per cent to hit 68.5 cents.

It eventually closed at 71 cents – just below the placement sale price - with a whopping 1.7 billion shares traded.

Analysts feel the recent surge in Genting Singapore shares has been overdone.

An OCBC Research report on Tuesday said: “Genting may also have to contend with higher interest payments as it continues to draw down its S$4 billion loan.”

It added that Genting’s British arm “could continue to languish, given the dismal economic picture there”, and that a rebound would likely come only in 2011.

Industry observers say the S$615 million raised via the private placement will give the Lim family more flexibility if one of its subsidiaries should need funds.

Market rumour suggests there may be a cash call from Star Cruises. In 2002, the Hong Kong-listed firm raised S$152 million with a rights issue to expand its fleet.

Genting Bhd chief executive Lim Kok Thay has a 60.15 per cent interest in Star Cruises, according to data compiled by Bloomberg.

Genting Singapore raised about S$2 billion in 2007 to finance the integrated resort. It has since indicated that additional funding will come from operating cash flows when the complex opens next year.

There is also speculation that the Lims may be raising cash to invest in MGM Mirage’s Macau casino.

Last Wednesday, Genting and Resorts World said they had each agreed to subscribe for US$50 million (RM175 million) of MGM commercial paper with yields of between 10.4per cent and 11.2 per cent so as to boost yields and excess cash.

Goldman Sachs analysts David Ng and Wilson Ng did not rule out the possibility that the Genting group intends to enter the Macau gaming market, but said the ‘situation remains highly fluid, and it is too soon to expect any outcome’.

Genting Singapore suffered a net loss of S$31.9 million for the first quarter ended March 31, against a net profit of S$6 million in the same period last year. – The Straits Times