Investment bank Maybank has cut its earnings estimates for Genting Malaysia by MYR40 million (US$8.6 million) per annum, and expanded its debt forecast to MYR465 million (US$100 million), after the company announced earlier this week plans to subscribe to a further US$100 million of preferred stock in US casino operator Empire Resorts.
As reported by Inside Asian Gaming, this week’s subscription takes the total amount invested into Empire by Genting Malaysia since 2019 to US$724 million, despite the US company continuing to operate at a loss.
In a note, Maybank’s Samuel Yin Shao Yang said the bank does “not look kindly” on the subscription, which effectively raises Genting Malaysia’s stake in Empire from 76% to 90% once all preferred stock is converted into full shares, with the implied valuation of Empire having fallen from US$1 billion on 5 December 2022 to US$750 million today.
“The lower implied valuation is justified, in our view, as Empire’s Resorts World Hudson Valley (RWHV), which opened in December 2022, is loss generating,” Yin wrote. “New York State Gaming Commission filings indicate that RWHV operations have not improved much.”
Despite this, Yin has raised his target price for Genting Malaysia shares from MYR2.93 to MYR3.03 because the runway for it to acquire more shares in Empire has narrowed now that it already holds an effective 90% stake.
He also maintains a “BUY” rating on Genting Malaysia shares on the company’s potential to win a downstate commercial casino license when New York announces its new licensees later this year.
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