Cairns disposal seen having positive impact on Genting

Genting Bhd's disposal of its subsidiary, Cairns Ltd, to BP Global Investment Ltd (BPGI) is expected to have a positive impact on the company, analysts say, according to Malaysian Business Times website.

An analyst with a local stockbroking company said the disposal of Cairns is a positive step taken by Genting as it allowed the group to recover almost all of its investment in the Tangguh liquefied natural gas project.

"Besides that, Genting will also be entitled to about 30 per cent of Cairns' share of the future profit in the project without making any further investments," the analyst added.

Cairns, which is a unit of Genting's 95 per cent-owned Laila Ltd, has a 45 per cent interest in the production sharing contract of the Tangguh project, located in Irian Jaya, Indonesia.

This means that Cairns is entitled to 9.66 per cent, or 1.39 trillion cu ft of gas, of the total certified proven gas reserves at the Vorwata Gas Field.

Another analyst with a securities company agreed that the disposal would be beneficial for the company.

"While the disposal might not have a significant impact on Genting's financial results, it will allow the group to narrow the losses recorded in its oil and gas division last year," the analyst said.

For the financial year ended December 31 2000, Genting's oil and gas division contributed RM51.1 million to the company's pre-tax loss of RM322.7 million.

Genting's revenue for last year stood at RM3.24 billion.

Last Friday, Genting announced that Laila had entered into a sale and purchase agreement with BPGI, a wholly-owned subsidiary of British oil giant BP plc, for the disposal of Cairns for an initial cash payment of about US$107 million (US$1 = RM3.80).

In an announcement to the Kuala Lumpur Stock Exchange (KLSE), Genting said it agreed to sell the entire stake of Cairns to BPGI on July 2 2001, and a total of US$103 million was paid on the same day.

The remaining US$3.8 million will be settled on or before January 31 2001.

"The disposal will allow Genting to align its interest with that of BP _ the world's second largest oil company and the operator and largest participant of the project _ and may pave the way for early development of the project thus enhancing the present value of cash flows attributable to Genting," the company said in the announcement.

The announcement of the disposal has also given Genting's share price a boost.

"The announcement of the disposal does have a positive impact on Genting's share price, although the upside on the KLSE last week might also be a contributing factor," an analyst said.

Yesterday, the company's shares rose 25 sen, or 2.7 per cent, to close at RM9.25 with a total of 1.62 million shares being traded.

It was the second biggest gainer among the blue-chip counters. (alex)