Genting shares lost more than RM4bil Negative reaction to recent company news

PETALING JAYA: More RM4bil were wiped out from the cumulative market value of the three listed shares of the Genting group of companies in Malaysia and Singapore during a day of trading as investors reacted negatively to the latest developments in the companies linked to the companies .

Casino operators emerged among the biggest losers on the Malaysian and Singaporean stock exchanges yesterday, with Genting Singapore Ltd taking the biggest drop.

On Bursa Malaysia, shares of parent company Genting Bhd fell 15 sen or 2.16% to RM 6.80, making it the seventh biggest decline yesterday. Its 49% subsidiary, Genting Malaysia Bhd, saw a decline of three sen or 0.91% to 3.25 RM.

The drop in both companies‘ stock prices came a day after Genting Malaysia confirmed its purchase of the controversial superyacht Equanimity, formerly owned by fugitive businessman Low Taek Jho, for $ 126 million (514.6 million of RM). The announcement has since garnered mixed reviews from industry watchers.

On April 3, Genting also announced that its indirect wholly-owned subsidiaries, Resorts World Las Vegas LLC and RWLV Capital Inc, had priced their US $ 1 billion notes at 4.625% to fund the development of the casino and the Integrated Resort Resorts World Las Vegas.

Across the road, Genting’s 52.7% -owned subsidiary, Genting Singapore, plunged to its lowest level in three months and lost 9.35% or 10 cents to 97 cents. This effectively wiped out approximately S $ 1.2 billion (RM 3.6 billion) from the company’s market capitalization.

The panic sell-off of Genting Singapore shares appears to be the result of the Singaporean government decision to increase entrance fees at casinos for citizens and permanent residents from April 4.

The share price also fell after the casino operator on April 3 unveiled a S $ 4.5 billion expansion plan for its Resorts World Sentosa.

Since the start of 2018, the shares of Genting, Genting Malaysia and Genting Singapore have generally been on the downside. Genting recorded a decline in its net profit in FY18 (FY18), while Genting Malaysia fell into the red during FY18.

Genting Singapore was on a better footing as the company reported stronger net income in FY18.

In Malaysia, equity analysts were mixed on Genting Malaysia’s purchase of the superyacht Equanimity.

The superyacht was purchased by Genting Malaysia at a 51% discount from its previous owner’s purchase price and was close to the government target minimum price of US $ 130 million.

Genting Malaysia said in a filing with Bursa Malaysia that the acquisition would allow the company to differentiate itself from its competitors, in addition to providing Genting Malaysia with a unique and competitive advantage for its premium customer business.

Hong Leong Investment Bank said it was “slightly positive” on the multi-million dollar purchase, as the superyacht would be able to complement Genting Malaysia’s VIP casino segment by transporting the big players to its casino and renting it out for private receptions.

“With the purchase of Equanimity, our estimated net debt ratio would increase to 11% (vs. 9%) on a proforma basis, which is acceptable.

“We are not charging any profit contribution from the purchase of Equanimity, as this impact is expected to be minimal on all things,” the brokerage said in a note yesterday.

The RHB research institute was also in favor of the acquisition, adding that the costs of maintaining and operating the superyacht would be manageable.

“According to media sources, the government has so far spent RM14.5 million to maintain equanimity since its recovery in August 2018.

“Under Genting Malaysia, we believe it could be lower than the cost incurred by the government, given Genting Group’s expertise in luxury cruise operations.

“Assuming a quarterly maintenance cost of RM 5 million to RM 6 million, we believe this is manageable given the company’s operating cash flow for FY18 of RM 2.8 billion. “, did he declare.

However, CIMB Research was not in favor of purchasing Equanimity.

“We view this news negatively because Genting Malaysia is not in the business of superyachts and cruise ships. Maintain “hold”. Earnings per share for fiscal years 19 to 21 could potentially drop from 3.4% to 5% if Genting Malaysia is unable to generate a contribution to Equanimity’s revenues.

“The re-evaluation catalyst is the opening of the new outdoor theme park in 2019 and the positive contribution to the profits of Equanimity, while the re-evaluation catalysts are the fact that the new theme park does not open in 2019 and the losses of Equanimity, ”said CIMB Research.

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