Genting Malaysia announces US$100 million investment into US subsidiary

Analysts are concerned after Genting Malaysia revealed a $100 million increase in its US subsidiary, Empire Resorts.

Genting Malaysia has invested a total of US$724 million in Empire Resorts since 2019. Genting ER II LLC, the company’s indirect wholly-owned subsidiary, subscribes to Empire’s “Series M Preferred Stock”.

Of the $100 million, $58 million will be used to pay back an existing bank loan, and the remaining $42 million will be used for operational capital by Empire.

Genting Malaysia now has a 49% stake in Empire, the management firm for the New York-based Resorts World Catskills and Resorts World Hudson Valley, as well as a mobile sports betting business. The largest shareholder in Genting Malaysia, Lim Kok Thay’s family trust, owns the remaining 51% of the company, Kien Huat Realty III Ltd.

Genting Malaysia said that by the time the stocks mature in the fiscal year 2030, its effective ownership in Empire would have risen to 89.6% if it converts all of its convertible stocks, including the extra Series M shares.

The company used the justification that the equity injection would enable Resorts World Hudson Valley to expand faster, assist Empire simplify its capital structure, and reduce financial strain. It also seeks to strengthen Genting Malaysia’s position in the developing gaming industry in New York State and enhance Resorts World Catskills’ operational performance.

Nomura analysts cautioned despite these claims, especially in light of Empire’s ongoing losses. They predicted that Genting Malaysia would lose MYR103 million (US$22 million) in 2024 and MYR128 million (US$28 million) from associates in 2023, mostly as a result of their part of Empire’s losses.

Nevertheless, given Resorts World Genting’s continuous recovery in Malaysia, analysts do not anticipate a significant negative impact on Genting Malaysia’s stock price. With a strong fourth quarter in 2023 and further gains in the fiscal year 2024, they predict that Genting Malaysia’s share price will continue to rise, helped by Malaysia’s recent reduction of visa requirements for visitors from China and India. The analysts focused on yield and operational increases for all assets, although underperforming asset losses decreased.

Original story by: IAG