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Genting Malaysia has announced that it will inject an additional $100 million into its U.S. subsidiary, Empire Resorts, bringing the total investment to $724 million. This decision has raised questions among analysts. The company stated that Genting ER II LLC signed a subscription agreement on January 10, 2024, subscribing to up to $100 million of "M Series Preferred Stock" of Empire, with $58 million intended to fully repay existing bank loans and the remaining $42 million allocated for operational funds.
Genting Malaysia holds a 49% stake in Empire. Empire currently operates the New York Resorts World Catskills (RWC), the recently opened Resorts World Hudson Valley (RWHV), and a mobile sports betting entity operational since March 2022.
The remaining 51% of Empire is held by Kien Huat Realty III Ltd, the largest shareholder of Genting Malaysia through the Lim Goh Tong Family Trust. The company stated, "The proposed equity injection will reduce the financial leverage and corresponding interest expenses of Empire and/or Genting Empire Resorts, further optimizing its capital structure. Additionally, it will expedite the development of RWHV and allow Empire to continue focusing on enhancing the operational performance of RWC to unlock its full potential. The proposed equity injection will also enable Genting Malaysia to consolidate its position, expand its market share in the New York state gambling market, and effectively compete in the northeastern United States."
RWC will continue to benefit from operational synergies with Resorts World New York City. However, Nomura analysts expressed negative views on the investment, considering Empire's ongoing losses. As a related-party transaction, shareholder approval is not required. Nomura Securities estimates that Genting Malaysia will incur losses of MYR 128 million ($28 million) in 2023 and MYR 103 million ($22 million) in 2024, primarily due to Empire's continuous losses. Nevertheless, analysts Tushar Mohata and Alpa Aggarwal anticipate that this latest injection will not have a significant impact on the stock price, attributing it to the ongoing recovery of Genting Malaysia's Malaysian integrated resort, Resorts World Genting.
They wrote, "Instead, we expect the recent recovery in Genting Malaysia's stock price to continue, with seasonal growth expected in the fourth quarter. With Malaysia recently granting visa exemptions to Indian tourists, we anticipate further improvement in the 2024 fiscal year." Operational/return rates for all assets have shown significant improvement, and losses from underperforming assets are decreasing. |
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Post time 22-1-2024 07:22:34