Thursday, December 5, 2013

Genting Hong Kong - Crystallising RNAV and pivoting back to Asia (CIMB)

Genting Hong Kong -
Current US$0.46
Target US$0.60
Crystallising RNAV and pivoting back to Asia

GENHK should receive US$375m from the latest secondary placement by Norwegian Cruise Lines (NCL). We estimate that GENHK will have US$1.3bn in cash illustrating its ability to crystallise its RNAV. We cut our FY13-15 EPS by 2-6% to factor in GENHK's reduced stake in NCL but maintain our target price which is based on a 20% discount to RNAV as the placement is monetising NCL's value. Catalyst is the market cap expansion of NCL and Travellers which account for 67% of GENHK's RNAV. Add maintained.  

We cut our FY13-15 EPS by 2-6% to factor in GENHK's reduced stake in NCL but maintain our target price which is based on a 20% discount to RNAV as the placement is monetising NCL's value. Catalyst is the market cap expansion of NCL and Travellers which account for 67% of GENHK's RNAV. Add maintained.


What Happened
GENHK is expected to receive at least US$375m (up to US$450m with greenshoe option) from the recent secondary placement by NCL and its stake in NCL should fall from 37.5% to 32.2% (31.4% with greenshoe).

What We Think
We believe that the timing and valuation of the transaction are good. It is selling NCL shares at an EV/EBITDA of 16x, a premium over its peers Carnival and Royal Caribbean which are trading at 11x and 13x respectively. Following the US$150m received in pre-IPO dividends from Travellers, the US$331m from NCL's secondary placement in Aug and an expected US$375m from this placement, we estimate that GENHK will have US$1.3bn in cash. GENHK has no new projects and intends to use the cash to shore up its balance sheet. It recently ordered a new US$957m mega ship in Oct for Star Cruises increasing its berth capacity in Asia by 44%. The ship will be the biggest cruise ship operating in Asia with 1,600 cabins and a carrying capacity of 4,500 passengers. It will feature 33 F&B outlets and 19 world-class recreational and MICE facilities in addition to 1,000 sqm of duty free retail space. Based on a capex-to-table assumption of US$3-5m, we expect it to have 200-300 gaming tables. This new ship is effectively a floating integrated resort and will operate in the same geographic basin as Macau. Under no regulations and taxes, we believe it will be able to offer significant value to the Asian leisure market.

What You Should Do
GENHK's stake in NCL is proving to be a liquid and solid source of capital. The discount to RNAV should narrow as NCL's value is further monetised. Continue to buy GENHK.


Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 04/12/13

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