Genting Bhd “ought to raise the offer price” per share in its bid for a conditional voluntary takeover of its unit Genting Malaysia Bhd, a global operator of casino resorts, according to a Tuesday note from Maybank Investment Bank Bhd. That was due to business opportunities in the United States for the unit.
On Monday, the parent said it was seeking to acquire 2.87 billion shares – or just under 51 percent of the total – for MYR2.35 (US$0.56) per share, equal to about US$1.59 billion.
“While 21 percent higher than our previous sum-of-the-parts target price of MYR1.95, the offer price does not take into account catalysts which could lift our ‘blue sky’ fair value to MYR3.28,” wrote Maybank analyst Samuel Yin Shao Yang.
Those catalysts included “revaluation” of the Miami, Florida, land that Genting Malaysia acquired in the United States in 2011; potential sale of certain non-gaming assets of associated U.S. business Empire Resorts Inc to the Sullivan County Resort Facilities Local Development Corp in upstate New York; and the possibility of a downstate New York casino licence in a bidding process there.
Maybank said that is has presently valued the Miami land “at cost”, i.e., US$442 million, though Genting Malaysia had attempted to sell it at “market value” of US$1.2 billion in 2023; however, the deal did not go through.
“If the land is revalued to US$1.2 billion, it will add MYR0.55 to our fair value,” wrote the analyst.
A downstate commercial casino licence in New York “could add at least MYR0.48 to our fair value, after 10 percent discount,” added Mr Yin, adding that results of the downstate New York process were expected on December 1.
Genting Malaysia has its flagship casino business – and the bulk currently of its earnings – from Resorts World Genting, its casino monopoly in Malaysia. It also controls casino businesses in the United States, the Bahamas, the United Kingdom, and Egypt.
Maybank observed that the Genting parent can only compulsorily acquire the remaining Genting Malaysia shares if the stockholder acceptance level reaches 90 percent of the remaining shares the parent does not own.
Mr Yin stated: “The offer document will be dispatched in or just under 21 days, and the offer duration will be for, or just over, 21 days. If both processes take 21 days, the closing date will be November 24.”
He added that as per Monday’s Bursa Malaysia announcement, the parent does not intend to maintain Genting Malaysia’s listing status.
In a Monday note on Genting Bhd, Maybank stated it estimated that “the interest expense on the… MYR6.3 billion new debt” to fund the Genting Malaysia acquisition “will neutralise the incremental earnings from Genting Malaysia, leading to effectively nil earnings accretion to Genting Bhd.”
In August, at the time of its second-quarter earnings, Genting Malaysia had opted not to pay a dividend, even as its earnings soared.
Net profit attributable to shareholders had reached MYR416.7 million for the three months to June 30, up 406.8 percent year-on-year.
Maybank observed in its Monday note on Genting Bhd and the implications of a takeover of Genting Malaysia: “At first glance, this deal does not appear favourable for Genting Bhd but after taking into consideration the potential catalysts currently accruing to Genting Malaysia, we estimate that its earnings could be boosted by just under or equal to 51 percent and sum-of-the-parts fair value to MYR4.25.”
