New UK PM orders reviews of super casino. The new UK Prime Minister, Gordon Brown, has ordered a review of super casino concept to determine whether it is the best way to regenerate towns and cities. A source close to the government was further quoted to say that ?the regional casino is pretty much dead in the water?. This is bad news for Genting International Public Ltd (GIL). Through its subsidiary Stanley Leisure, GIL is one of the largest gaming players in UK and is the leading contender for the super casino license which was expected to be located in Manchester.

Different priorities. The review is over and above the surprise gaming tax that was incidentally imposed by Mr Brown when he was the previous Chancellor of the Exchequer (Minister of Finance) in his last Budget Statement. Collectively Mr Brown?s 2 decisions on the casino can be read to mean that he is possibly not in favour of American style Integrated Resort. Furthermore, his priorities could be different from that of the previous PM Tony Blair.

Future funding likely debt or project financing. Recently GIL announced that it intends to raise S$2.0-S$2.3bn via a rights issue on the basis of 3 new shares for every 5 existing shares held. The pricing of the rights will be determined after an EGM to be held at a later date. GIL revealed that it intends to use the funds for the development of Sentosa Integrated Resort (IR), repayment of debt as well as for working capital. This cash call will be the third since GIL won the Sentosa IR and if the current rights issue is successful, GIL would have raised a total of S$3.18bn since January 2007. This means GIL would still need to raise a further S$2.0bn to finance its S$5.2b Sentosa project, but we expect the balance to be most likely to be debt financed.

Maintain HOLD. The key investment case for GIL remains its ability to win more concessions for integrated resorts. In light of the recent development, the UK super casino license appears to have been put on hold indefinitely. As for valuation, we have ascribed about 75% option value for the UK win, and that translates to a fair value estimate of S$0.86. We see limited upside from current trading range and we thus maintain our HOLD recommendation.