Genting Malaysia will invest in its subsidiary from the US, Empire Resorts, one more time. The most recent investment is US$100 million, which takes the total investment to US$724 million. However, the huge amount of money invested in Empire Resorts since 2019 made the analysts question whether the decision was right.
The investment of US$100 million:
Genting ER II LLC, the indirect wholly-owned subsidiary of Genting Malaysia, signed a Subscription Agreement to get “Series M Preferred Stock” of Empire, worth up to US$100 million. The Empire will use a part of the funding, US$58 million to repay a bank facility, and working capital will be boosted for the remaining US$42 million.
Empire Resorts currently operates the Resorts World Catskills (RWC) in New York, Resorts World Hudson Valley (RWHV), as well as a mobile sports betting platform that started operating in March 2022. Genting Malaysia owns a 49% stake in the company, and the remaining stakes are owned by Lim Kok Thay’s Kien Huat Realty III Ltd, the largest shareholder of Genting Malaysia.
If Genting Malaysia chooses to convert all the stocks it can to convert, the shares will grow to 89.6% by the financial year 2030. The company claims that the Empire will be able to reduce the financial leverage and expenses, as well as focus on developing the full potential of its operations in the US, thanks to the funds provided.
On the other hand, the analysts from Nomura don’t think that the decision about the investment is questionable since the Empire hasn’t been profitable in the recent period. The shareholders’ approval wasn’t required for the transaction.
It is expected that the losses of the partners of Genting Malaysia will reach MYR128 million, or US$28 million in 2023, and MYR103 million (US$22 million) in 2024.
Bidding for new license:
Tushar Mohata and Alpa Aggarwal, the analysts who worked on the case, don’t expect major changes in the stock prices due to the new investment, since Malaysian IR, Resorts World Genting, is still recovering.
As Inside Asian Gaming reports, they commented: “On the contrary, we expect the recent recovery in Genting Malaysia’s share price to continue and expect the Dec quarter (4Q23) to be seasonally strong, with further improvements expected in FY24 with Malaysia’s recent visa waiver to Chinese and Indian tourists. There are clear operational / yield improvements in all assets, and losses from underperforming assets are narrowing.”
Asia Gaming Brief reports that the investment follows Genting bidding for one of three licenses in New York, bidding against huge industry names such as Las Vegas Sands, MGM, Caesars, and Wynn. Once the license is granted, the operators will be obligated to make $2 billion in revenue per year, as well as $600 million in profit.
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