Genting Malaysia in the red after sizeable Empire Resorts Inc equity injection

KUALA LUMPUR, Sept 14 — Genting Malaysia Bhd (GENM) is in the red after another sizeable equity injection into its loss-making US-based associate, Empire Resorts Inc (ER), but the latter’s prospects may improve, says CGS-CIMB.

At 11am, the stock was 2.3 per cent or five sen lower at RM2.16 with 7.4 million shares traded.

GENM announced on Friday that it will subscribe for up to US$150 million or RM625 million of 49 per cent-owned associate ER preference shares (Series L).

CGS-CIMB viewed the move as a negative development as ER is expected to be loss-making over the next five years.

“Post-completion, GENM’s share of ER’s losses will rise from 49 per cent to 57 per cent, lowering our financial year 2021 - 2020 (FY2021-FY2022) earnings per share (EPS) by 2.9 - 5.5 per cent,” it said in a note today.

It has also cut sum of parts-based target price for GENM by 3.6 per cent to RM2.70, after factoring in the investment in ER’s preference shares.

“We also note ER’s prospects may improve if it is able to proceed with the development of an electronic games machine facility in Orange County and to extract greater-than-expected synergies with Resorts World New York City as well as awarded a sports betting licence in the state of New York.”

The injection exercise is expected to be completed by end-2020, bringing GENM’s total investment in ER to US$357.5 million or RM1.5 billion to date.

“While further equity injection(s) cannot be ruled out, additional fund-raising in the near-term may be via the debt market as ER is working on its bond offering,” the research house added. — Bernama