News: Genting Singapore is undertaking a renounceable underwritten rights issue at issue price of S$0.80 for each rights share, on the basis of 1 rights share for every 5 existing ordinary shares. At the existing share base of the company, approximately 1.9b rights share is expected to be issued, translating to S$1.5B in expected funds raised. Genting Singapore intends to use approximately 60% of net proceeds raised from the rights issue for funding of future acquisitions and/or investments undertaken by the group. The remaining 40% will be used for working capital purposes and includes repayment of bank borrowings.

Impact on our net profit, EPS estimates: As a result of the interest savings, we are increasing our net profit forecast for FY10E, FY11E and FY12E by 44%, 10% and 4% respectively. EPS in FY11E and FY12E are reduced by 9% and 13% respectively, due to the enlarged share base. EPS in FY10E, however, is higher by 20% as the interest savings were significant as a proportion of the smaller operational income base (1st year of opening of its Singapore project).

Ex-rights June-2010 PT of S$1.15; in bullish case, stock could trade up to S$1.95. We adjust our PT downward from S$1.20 to S$1.15 to factor in the additional shares / capital raised from the rights. In our initiation report dated 11th August 2009, entitled 'Playing it forward', we highlight that the stock could trade up to S$2 if we were to adopt bullish case assumptions (see pg 14 of the initiation report). Ex-rights, we believe the bullish case fair value is closer to S$1.95.