Is Genting Singapore taking over Aussie-listed Echo?

Armed with net cash of S$1.8bn, an acquisition could be on the cards, says CIMB.

Genting Singapore confirmed last week that it holds a stake in Australia-listed Echo Entertainment. It remains tight-lipped on the size of its interest, though the press reported that Genting had built up a 4.9% stake in Echo.

According to CIMB analyst Loke Wei Wern, Genting Singapore’s current stake in Echo does not necessarily constitute an interest in the ultimate takeover of the company, but CIMB does not rule out this possibility.

There are press reports suggesting that Genting Singapore could be interested in striking a deal with Crown’s James Packer to secure a foothold in Macau. Backed with net cash of S$1.8bn, Genting Singapore has hinted that its future acquisitions will not be restricted to greenfield projects. It recently raised S$2.3bn in perpetual capital securities at an interest cost of 5.125%.

"We think it is in its interest to speed up the acquisition process. Among Echo’s appeal is its Star City casino which is strategically located in Sydney. Based on its last traded price, Echo is valued at A$3.1bn (S$3.9bn). Assuming 1/3 equity financing, Genting Singapore’s outlay will amount to c. S$1.3bn. But we think the domestic regulatory
approval process and Crown’s 10% blocking stake in Echo may prove to be challenges," Loke said.