KUALA LUMPUR (NewsRise) - Malaysia's gaming giant Genting and its unit Genting Malaysia will sell their combined 17% stake in cruise ship operator Genting Hong Kong for a total $420.8 million to Golden Hope Limited.
The related-party transaction will allow Genting and Genting Malaysia to dispose their investments in the barely-traded Genting Hong Kong that fetched little returns for nearly two decades, analysts said.
"This disposal allows Genting Malaysia to monetize its loss-making investment in Genting Hong Kong, which provides minimal income yield," said Hong Leong Investment Bank's analyst Lee Meng Horng.
Lee calculated that Genting Malaysia received only 106 million ringgit ($26 million) in dividends after investing about 4.12 billion ringgit since 1998. Proceeds could "be put to better use" as working capital and capital expenditure while allowing the company to maintain a net cash position, he added.
Genting and its 49%-owned Genting Malaysia are both controlled by chairman Lim Kok Thay and his family. Golden Hope, a trust owned by Lim and his family, currently owns 47.22% in Genting Hong Kong.
Genting Hong Kong, whose shares are listed in Hong Kong and also in Singapore, operates seven ships under its flagship brand Star Cruises. Apart from cruise vessels, the company also has shipbuilding business, while its associate Travellers International Hotel Group operates a casino resort in Manila, Philippines.
Shareholders of Genting Malaysia had earlier approved a renewed mandate to sell its 16.9% stake in Genting Hong Kong at a $0.29 a share after an unsuccessful effort to sell the stake at $0.33 per share. Genting owns a 0.24% stake in Genting Hong Kong.
Genting Malaysia said proceed from the all-cash deal is expected to fund investments or working capital, although the company has yet to identify any specific investment.
"We are positive on the disposal as the proceeds can be used for meaningful projects as the non-core stake investment in Genting Hong Kong had hardly seen any returns," said Kenanga Investment Bank's analyst Teh Kian Yeong.
Earlier this year, Genting said it will raise its capital outlay to 10.38 billion ringgit - more than double its initial projection - to revamp its flagship resort in Malaysia under the so-called Genting Integrated Tourism Plan.
The decade-long initiative, spearheaded by Genting Malaysia, involves the make-over of Genting Highlands-a 44-year old hilltop resort about two-hour drive from Kuala Lumpur-that already draws some 20 million tourists annually.
Shares of Genting rose 0.9% to 8.00 ringgit while Genting Malaysia was up 1.1% to 4.60 ringgit on Tuesday. The benchmark FTSE Bursa Malaysia KLCI rose 0.5%.