Star Cruises' stock drops 12.5% on concerns over Macau project funding

INVESTORS of Star Cruises jumped ship yesterday after sister firm Genting International pulled out of a Macau casino project linked to Hong Kong tycoon Stanley Ho.

The shares were suspended on Monday to allow the company to make the announcement but once the halt was lifted yesterday morning, the selldown began.

Star Cruises' share price closed down four US cents, or 12.5 per cent, at 28 US cents on a heavy volume of 32.9 million shares, a far cry from its high of 57 US cents reached on Jan 23.

Genting's stock closed two cents lower at 86.5 cents on 117.3 million shares traded.

Investors are concerned over the ability of heavily-indebted Star Cruises to shoulder the finances of the HK$3.5 billion (S$685.3 million) Macau project on its own now that Genting has backed out.

Star Cruises, which has long-term borrowings of US$3.2 billion (S$4.9 billion), had formed a 75:25 joint venture with Genting. This entity, in turn, intended to take a 75 per cent stake in the Macau casino project in partnership with Mr Ho.

Star Cruises had also agreed to sell a minority stake to Mr Ho and other investors.

But the company said on Tuesday that it had agreed to buy Genting's 25 per cent stake for HK$58.5 million.

This will raise the funding it has to stump up for the project by HK$875 million to HK$3.5 billion, once projected borrowings are taken into account.

Those numbers spooked investors, who were alarmed at the prospect of yet another cash call from a firm that has already made three rights issues in the past five years.

Star Cruises admitted as much, saying that 'to meet such funding requirements, it intends to utilise internal resources, available un-utilised credit facilities and/or additional equity to be raised...details of which have not yet been determined'.

The unravelling of the joint venture is seen by many as a bid by Genting to protect its Sentosa casino resort project by selling its Macau stake to Star Cruises.

In turn, Star Cruises is selling its 25 per cent stake in the Singapore resort to Genting.

Star Cruises and Genting are controlled by Malaysia's Lim family through Malaysia-listed Genting Berhad.

The catalyst for all these corporate movements has been the controversial figure of Mr Ho.

Singapore's Home Affairs Ministry has said it will conduct suitability checks on Genting's new shareholders, including Mr Ho, before deciding whether to give the Genting consortium a casino licence.