Leng Lui Stock Analyst's call, come support !!!

Dear My Valued Customers,

Genting Singapore's proposal: Rights issue 1 for every 5 at S$0.80 each. Ex date: 18 Sep 2009

Genting (Stock code: 3182) has 54.4% stake in Genting Singapore. This means it will cost RM2.1 billion to subscribe for the rights issue. However Genting holds only RM310 million in cash, deposits and money market instruments as at end-FY 2008

3 possibilities for Genting (Stock Code: 3182) in raising money to answer the cash call:

1) Intercompany loan with GenM (Stock code: 4715, used to known as Resort)
As at end June 2009, GenM's cash holding amounted to RM5.1 billion. If Genting does end doing on interco with GenM, however, it should be kept in mind that occurred between Berjaya Sports Toto Bhd and Berjaya Land Bhd. An interco between the two related companies had massively depressed BJToto's share price until the issue was eventually resolved.

2) Dividend payout from GenM
For FY2008 and FY2007, GenM paid a gross dividend of 7 and 6.48 sen per share respectively. For FY2008 and FY2007, Genting's dividend income came to RM247.1 million and RM1.26 billion respectively. However, analyst said it is unlikely that GenM will suddenly give a bumper or special dividend. At most, it will be slightly higher than its normal dividend payout.

3) By bank borrowing
If Genting chooses to fund the exercise purely by borrowings with a finance cost of 7%, forward earnings could be cut by up to 8%. Analysts calculates that if Genting were to raise the entire RM2.1 billion it requires via bank borrowings at an average interest rate of 5.5%, the impact on FY2010 earnings is estimated at 7.1%, with net interest cover remaining steady at 5.9 times versus the current 10.6 times.

My Valued customers,

What is the best step should be take by Genting to exercise the right issue? In my opinion, a combination of debt and cash from GenM will be good to Genting. In this case, i think the cash rich counter like GenM (Stock code: 4715, used to known as Resort)should be a good-buy counter. What do you think?