Sources say the Genting group is making a bid for Pan Malaysian Pools Sdn Bhd (PMP), the number forecast operator (NFO) owned by Tanjong plc.
It is not known the price that Genting group is willing to pay for the NFO, but sources said its bid is in the “higher end among bids that have been submitted”. The other bids are believed to be between RM1.8 billion and RM2.5 billion.
The bid from Genting involves allocating certain amount of profits from PMP for charitable causes, including donations to Chinese schools. The charitable gesture might enable Genting group to stand a higher chance of winning the race.
If true, the Genting group is the latest party to join the race for the PMP, which was put up for sale after the privatisation of Tanjong.
Although it has been in the gaming business for over 40 years, some say the NFO business is an entirely different ball game and some do not believe Genting is putting in a bid for PMP, as “it is not in line with the group’s current strategy which is to expand overseas”.
Since news of PMP being put up for sale emerged mid-2010,the NFO has attracted a number of suitors, including Olympia Industries Bhd (controlled by Datuk Yap Yong Seong, better known as Duta Yap); Rimbunan Hijau, the investment vehicle of Tan Sri Datuk Tiong Hiew King; and the Cheng family who own a slot machines business in the Klang Valley. Filipino tycoon Roberto Bobby Ongpin and Datuk Lim Kang Hong, who controls Ekovest Bhd, are also said to be interested in PMP.
Even political party MCA was once rumoured to be interested in buying the gaming asset, though its president Datuk Seri Dr Chua Soi Lek denied any such interest.
If the Genting group is indeed bidding for the NFO business, the next question is: Which company in the group will be the vehicle to acquire the asset?
From a balance-sheet perspective, it appears both Genting and Genting Malaysia should have no difficulty in financing the purchase since the two listed entities can afford to gear up.
As at Sept 30, 2010, Genting’s cash and cash equivalents stood at RM15.3 billion while it had borrowings of RM14.5 billion. This translates to a net gearing of barely 4.65%. Casino operator Genting Malaysia, on the other hand, is in a net cash position. Its cash position stood at RM4.5 billion as at Sept 30 last year, against debts of RM618.7 million.
However, Genting Malaysia’s cash pile has shrunk after the company went on an expansion exercise in 2010. It bought over the UK casino business of its sister company Genting Singapore Ltd for £340 million (RM1.66 billion). Also, Genting Malaysia won its bid to run a “racino” with 4,500 slot machines at the Aqueduct Racetrack in New York for 30 years. The licence fee alone was US$380 million (RM1.1 billion). On top of that, Genting Malaysia in December 2010 announced that it was “collaborating” with a partner to explore an investment in a casino holiday resort in Vietnam. The Vietnamese media reported that the project could be worth as much as US$4 billion.
These ventures will probably keep Genting Malaysia busy for the moment, especially since much effort is needed to revive the over 40 casinos in its UK operation.
Considering the steady cash flow that the PMP’s NFO business is generating, it is not difficult to understand why it has attracted so much interest.
Cash from the NFO division was used to pay almost 75% to 85% of Tanjong’s dividends every year. Between FY2006 and FY2010, Tanjong dished out net dividends per share ranging from 51.5 sen to 75 sen. Its dividend payout ratio for that period was in the range of 59.6% to 78.3%.
For FY2010 ended Jan 31, 2010, Tanjong’s NFO division recorded gross sales proceeds of RM2.05 billion and operating profit of RM234.8 million. However, PMP’s racing totalisator business has been bleeding red ink due to the escalating totalisator fee charged by turf clubs. The division incurred an operating loss of RM65.8 million on gross sales proceeds of RM1.09 billion.
No comments:
Post a Comment