A corporate tussle may be brewing between two Malaysian tycoons, Tan Sri Quek Leng Chan and Tan Sri Lim Kok Thay, for bigger control of a UK gaming company.
Source say Quek’s UK gaming outfit Rank Group plc will has corporate activity in the company, “which may not be long in coming”. Quek’s Hong Kong-listed flagship Guoco Group Ltd owned a 29.25% stake in Rank (as at June 30, 2010) while Lim’s Genting Bhd held an 11.59% stake.
If either of these groups is considering a bid, the catalyst could be further positive progress at Mecca (Rank’s Bingo Club) and this may not be long in coming.
Observers aid if there ever is a bid in the pipeline, it would be from Guoco. Speculation that Guoco may raise its stake in Rank to a more significant level has been around for some time. This seems more likely now because Rank has improved its operating performance, and it fits into Quek’s “style” of owning at least a 60% stake in each of his core listed companies.
It is understood that Genting monitors the movements in Rank very closely. Genting is ramping up its gaming business in the UK with the recent transaction (Genting Singapore plc just sold its UK gaming operations to cash-rich Genting Malaysia Bhd).
Source say Quek’s UK gaming outfit Rank Group plc will has corporate activity in the company, “which may not be long in coming”. Quek’s Hong Kong-listed flagship Guoco Group Ltd owned a 29.25% stake in Rank (as at June 30, 2010) while Lim’s Genting Bhd held an 11.59% stake.
If either of these groups is considering a bid, the catalyst could be further positive progress at Mecca (Rank’s Bingo Club) and this may not be long in coming.
Observers aid if there ever is a bid in the pipeline, it would be from Guoco. Speculation that Guoco may raise its stake in Rank to a more significant level has been around for some time. This seems more likely now because Rank has improved its operating performance, and it fits into Quek’s “style” of owning at least a 60% stake in each of his core listed companies.
It is understood that Genting monitors the movements in Rank very closely. Genting is ramping up its gaming business in the UK with the recent transaction (Genting Singapore plc just sold its UK gaming operations to cash-rich Genting Malaysia Bhd).
If Guoco does launch a bid, Genting may want to counter that.
At 117.7 pence, Rank listed on the London Stock Exchange give a market value of £458.4 million (RM2.24 billion).
At 117.7 pence, Rank listed on the London Stock Exchange give a market value of £458.4 million (RM2.24 billion).
Rank described itself as the fifth largest gaming group in the UK by revenue (£520.5 million). It operates 35 casinos under the Grosvenor brand, 103 bingo clubs under the Mecca Bingo brand and also has online gaming and betting operations through its unit Rank Interactive.
In comparison, the UK casino operation (Genting UK) that Genting Malaysia bought from Genting Singapore was valued at £340 million. The UK (and Europe) casino operations previously under Genting Singapore posted a revenue of £215.83 million in FY09.
Genting UK has the largest number of casino properties in the UK. The 44 properties include five which are located in London. The group’s brands include Crockfords, Colony Club, Maxims, Circus, The Palm Beach and Mint. However, Genting UK doesn’t run Bingo clubs, which contributed £233 million or 45% to Rank’s FY09 revenue.
Quek, who is known for his ability to sniff out bargains, invested in Rank through Guoco in January 2008 or even earlier, after the UK casino industry was hit by a smoking ban that came into effect in July 2007. As a result of the smoking ban, Rank’s share price fell from 227.64 pence at the beginning of 2007 to 91.25 pence at the end of that year.
In comparison, the UK casino operation (Genting UK) that Genting Malaysia bought from Genting Singapore was valued at £340 million. The UK (and Europe) casino operations previously under Genting Singapore posted a revenue of £215.83 million in FY09.
Genting UK has the largest number of casino properties in the UK. The 44 properties include five which are located in London. The group’s brands include Crockfords, Colony Club, Maxims, Circus, The Palm Beach and Mint. However, Genting UK doesn’t run Bingo clubs, which contributed £233 million or 45% to Rank’s FY09 revenue.
Quek, who is known for his ability to sniff out bargains, invested in Rank through Guoco in January 2008 or even earlier, after the UK casino industry was hit by a smoking ban that came into effect in July 2007. As a result of the smoking ban, Rank’s share price fell from 227.64 pence at the beginning of 2007 to 91.25 pence at the end of that year.
There is a possibility of a corporate tussle between two Malaysian tycoons — Tan Sri Quek Leng Chan of Guoco and Tan Sri Lim Kok Thay of Genting — for bigger stakes in UK gaming company Rank Group plc. Rank operates casinos in UK as well as Bingo clubs. If this prompts a bid from Guoco, it could see a counter-bid from Genting.Guoco had presumably bought shares in Rank near its lows. The Quek vehicle held only a 4.09% stake as at Jan 24, 2008, while Genting already held a 10% stake in Rank at that time. Nonetheless, Guoco had continued to raise its holdings in Rank to the current level of 29.25%, making it the single largest shareholder ahead of Genting, which only raised its stake from 10% to 11.59% during the period.
Given that the stock is still trading at an undemanding valuation of around 13 times historical earnings and continues to show improvements in its operating performance, observers say it is a matter of time before Guoco ramps up its stake further and make Rank one of its core units.
Guoco is Quek’s main investment vehicle and is cash rich after it sold Dao Heng Bank in Hong Kong in 2001 for US$5.4 billion (RM16.63 billion). The group distributed part of the proceeds to shareholders and kept the bulk for investment and financial trading purposes.
As at June 30, 2010, Guoco had a cash war chest of HK$6.4 billion (RM2.55 billion), excluding trading financial assets worth another HK$18.14 billion which can be readily turned into cash.
Flushed with cash and liquidity, Guoco is in a position to launch bids for companies. In terms of financial muscle, Guoco is a worthy competitor for the Genting group, which is also in the process of ramping up its UK casino business through Genting Malaysia.
The UK outfit reported revenue of £520.5 million for FY09 ended Dec 31, with an operating profit of £57.9 million and net profit of £38.5 million. According to Bloomberg consensus, analysts expected Rank’s revenue to increase to £567.17 million in FY10 and £584.8 million in FY11, with operating profit rising to £59.23 million and £63.65 million respectively.
Stronger operating performance may help reduce Rank’s net debt further. The group has reduced its net debt from £316.9 million as at end-FY07 to £133.4 million as at June 30, 2010, against shareholders’ equity of £75.6 million.
Rank stands at a point of inflection. Having weathered recessionary and legislative storms, the challenge is now to kick on and deliver sustainable growth. Observers believed that Rank can achieve this, as it has the balance sheet and a clear opportunity in casino, while Full House (a redesigned concept of bingo club) could accelerate growth within bingo (division).
Flushed with cash and liquidity, Guoco is in a position to launch bids for companies. In terms of financial muscle, Guoco is a worthy competitor for the Genting group, which is also in the process of ramping up its UK casino business through Genting Malaysia.
The UK outfit reported revenue of £520.5 million for FY09 ended Dec 31, with an operating profit of £57.9 million and net profit of £38.5 million. According to Bloomberg consensus, analysts expected Rank’s revenue to increase to £567.17 million in FY10 and £584.8 million in FY11, with operating profit rising to £59.23 million and £63.65 million respectively.
Stronger operating performance may help reduce Rank’s net debt further. The group has reduced its net debt from £316.9 million as at end-FY07 to £133.4 million as at June 30, 2010, against shareholders’ equity of £75.6 million.
Rank stands at a point of inflection. Having weathered recessionary and legislative storms, the challenge is now to kick on and deliver sustainable growth. Observers believed that Rank can achieve this, as it has the balance sheet and a clear opportunity in casino, while Full House (a redesigned concept of bingo club) could accelerate growth within bingo (division).
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The gaming group’s strategy to refurbish its casinos and add gambling machines, bar and restaurant to its bingo halls are paying off in terms of higher revenue.
The casino group, in which both Guoco Group Ltd controlled by Tan Sri Quek Leng Chan and Genting Bhd hold a substantial equity stake, announced that its total revenue was up 7% for the 3Q ended Sept 30. For the year to date, like-for-like revenue rose 4% and total revenue 7% as well.
The casino group, in which both Guoco Group Ltd controlled by Tan Sri Quek Leng Chan and Genting Bhd hold a substantial equity stake, announced that its total revenue was up 7% for the 3Q ended Sept 30. For the year to date, like-for-like revenue rose 4% and total revenue 7% as well.
UK-based Rank Group Plc is expecting its full-year performance to be around the top of analysts’ forecasts in view of the continued revenue growth during the third quarter (3Q).
Analysts estimate Rank’s full-year pre-tax profit to range from £48 million (RM237.5 million) to £53 million compared with £49 million for 2009.
Analysts estimate Rank’s full-year pre-tax profit to range from £48 million (RM237.5 million) to £53 million compared with £49 million for 2009.
The revenue growth in the Rank Group will raise hope that the former’s UK operation would stand a chance to turn around should the new management put in more efforts to revamp its strategy.
Quek is the single largest shareholder of Rank, holding 29.5% equity stake while Genting Bhd holds 11.59%.
Rank officials say The group has continued to trade well since the half-year with particularly strong performance from both Grosvenor Casinos and Rank Interactive.
Grosvenor Casinos, which owns 35 casinos in UK and two in Belgium, delivered revenue growth of 9% fuelled by higher customer visits and spend per visitor. Rank’s Mecca Bingo, which comprise of 103 bingo clubs in UK, achieved 2% growth in revenue.
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