Resorts World, Not The Full Picture Yet

At current prices, Resorts World is about RM20 prior to the share split exercise. The huge jumps in volume sent many scurrying around to look for answers. First bit of news was that Genting Bhd has reduced its shareholding in subsidiary Resorts World Bhd 49.98 percent. This follows two measures it has taken. One is the exchange of US$199.5 million - from the US$300 million one percent guaranteed exchangeable notes due 2008 issued by Genting's wholly-owned subsidiary Prime Venture (Labuan) Ltd - into existing RWB ordinary shares. The other is the conversion of RM655.4 million of the RM1.1 billion nominal value convertible notes issued by RWB into new shares. Genting deputy chairman Tun Mohamed Hanif Omar in a statement to Bursa Malaysia said Genting's percentage shareholding in RWB will continue to be reduced progressively until the exchangeable notes and convertible notes are fully redeemed. Although the company's shareholding in RWB has fallen to below 50 percent RWB will continue to be consolidated as a subsidiary of the company as the company continues to have control of it.

This could be a prelude of things to come. Why would Genting want to dilute down its holdings in Resorts World? To accomodate a new controlling shareholder? Or a new substantial shareholder? Genting / Resorts still sorely lack sufficient exposure to the new Macau strip. Stanley Ho still wants to hedge his bets for his family now that he is near the "exit door". Stanley may not be entirely comfortable or confident of his children being able to ensure his empire continue to flourish for the next 50 years. Genting does not want to irk Singapore anymore, but by reducing Resorts, in the event of new shares issued by Resorts to the new shareholder, Genting may see its stake diluting even further - thus distancing further from ties with Stanley Ho (if indeed Stanley is involved). By getting a stake in Resorts and Star Cruises, it widens Stanley's empire plus being able to close ties with the two most important gaming giants from Asia may ensure synergies for the future - mostly to buy some insurance for his kids when he is gone.



Methinks there is a huge rerating going on for Resorts. At the end of the day the stock is just like a good annuity, churning cash from the single casino. Not much else. Some think that it may give out a big dividend. Well, its cash per share is not much, we are talking som over 5 billion shares here. The likely catalysts for the current run:



a) Sales of 36% stake in Star Cruises. Star Cruises has been cancerous for Resorts World, doing the yearly dilution on earnings and always requiring additional capital. If Star Cruises is removed with a decent price, Resorts world be rerated nicely. But who would buy? The key could be in the recent appointment of D Chua as head of Star Cruises. Good ties with Stanley Ho, and the botched deal with Genting/Sentosa and Stanley Ho could very well see Stanley Ho taking up Star Cruises. It does make sense for his empire as well. Plus Stanley Ho likes big ships.



b) The nature of such a transaction. If it was a clean cash sale, it will be good for Resorts but not very very good. If the transaction involved a share exchange with any one of the Ho's family vehicle operating the new Macau casinos - things would be very very different. Finally Resorts could be in for a complete makeover.



I strongly suspect its this development which is driving the share price. Volume looks very genuine. Worth a punt. Buy and hold till actual news is announced. Resorts-CC looks extremely good now.