Financial research firm CreditSights Inc says it has concerns that an investor lawsuit in the United States faced by a unit of Genting Malaysia Bhd over its Resorts World Bimini casino operation in the Bahamas, potentially “hurts” the Genting group’s chances of winning a downstate New York casino bid in the U.S.
The information is in a Wednesday update as part of the initiation of the institution’s coverage of Malaysian conglomerate Genting Bhd and its unit the global casino operator Genting Malaysia. The latter has gaming business in Malaysia, the United States and the Bahamas, and the United Kingdom and Egypt.
CreditSights said that, “in a worst-case scenario of an unfavourable ruling demanding payment of millions of U.S. dollars, Genting Malaysia may likely have to fork up the full or partial amount, resulting in some pressure to its leverage metrics.” But the financial research firm said it did “not assign a high likelihood” to this scenario.
But the institution observed: “What we are more concerned of is: the risk that the lawsuit hurts [Genting’s] chances of winning the downstate [New York] casino bid; [and] the hit to Genting Bhd’s and Genting Malaysia’s reputation and investors’ overall perception of corporate governance”.
CreditSights took the view that the Genting parent had “higher exposure to governance risks, given its history of making extensive related party transactions, especially with its financially weak associate Empire Resorts Inc, as well as history of debt default by Genting Hong Kong [Ltd] back in 2020”.
That was a reference to a now-liquidated and formerly Hong Kong-listed entity that operated casino cruise ship businesses, but was badly affected by disruption to operations during the Covid-19 pandemic, at the same time as it had pending the construction of new cruise vessels.
Nonetheless CreditSights said – referring to the current head of Malaysia’s Lim family that founded the Genting group – it did “not assign a large governance premium” for Genting Bhd, “as we are cognisant that Genting Hong Kong was an entity controlled by Lim Kok Thay with Genting Bhd having no stake in the company since 2016”.
The institution added: “We also note Genting Bhd and Genting Malaysia did not provide any funding support to Genting Hong Kong over the years, even when Genting Hong Kong faced financial stress and defaulted/liquidated subsequently.”
Bond spread versus LVS
CreditSights said it regards as “unjustified” the situation that Genting Malaysia’s sole 2031-maturity bond trades at a wider spread than casino peers Las Vegas Sands Corp and Sands China Ltd.
Las Vegas Sands controls, via a unit, the operations of the Marina Bay Sands casino resort in Singapore, and is also the parent of Macau casino group Sands China Ltd.
CreditSights stated in its Thursday update: “Genting Malaysia’s sole 2031 bond trades 38 to 42 basis points wider than casino peers Las Vegas Sands and Sands China’s similar maturity bonds, which we view as unjustified for Genting Malaysia.”
The institution gave some commentary on its view of Genting Malaysia’s 2031-maturity bond issuance, versus Las Vegas Sands’ 2029-maturity issuance.
CreditSights thought that a “fair spread differential” for Genting Malaysia would be “about 30 to 35 basis points wider, against a current spread differential of 42 basis points or wider”.
Though the institution acknowledged: “While Genting Malaysia enjoys better geographical diversification, sole dominance in Malaysia – mitigated by Las Vegas Sands’ leading market shares in Singapore and Macau – and is set to benefit from a likely [upstate] New York casino licence win, Genting Malaysia has much smaller EBITDA [earnings before interest, taxation, depreciation and amortisation], [and] weaker net leverage (4.7 times versus LVS’ 2.5 times).”
But CreditSights added: “We see scope for Genting Malaysia 2031 [maturity bonds] to tighten approximately 5-plus basis points versus Las Vegas Sands’ 2029 [maturity bonds].”
For the whole of 2024, Genting Malaysia had a profit of nearly MYR251.28 million (US$56.8 million), though that was down 42.3 percent year-on-year. Full-year revenue was MYR10.91 billion, up 7.1 percent year-on-year.
