KUALA LUMPUR – CGS-CIMB has reduced its target price for Genting Malaysia Bhd to RM3.40, factoring in its latest RM625 million (US$150 million) equity injection into New York-based associate Empire Resorts Inc (ER).
However, the brokerage maintained an “add” rating on the stock, saying it still yielded a total return of more than 10%.
Genting Malaysia’s wholly owned unit entered into an agreement to subscribe for up to US$150 million of additional ER preference shares (Series L) earlier this week, which brought its total investment in ER to US$524 million (RM2.2 billion) to date.
This will be funded through proceeds from its US$1 billion bond issuance completed in mid-April.
ER would utilise the proceeds to partly repay its US$365 million of short-term debt, which was earlier raised in March 2021 for working capital and debt refinancing.
“While we understand the rationale for the exercise, we see it as a negative development for Genting Malaysia as we project ER to still be loss-making over the next five years,” CGS-CIMB said in a note today.
It said its projection of ER’s losses already took into account earnings contribution from the Resorts World Hudson Valley (RWHV) video gaming machine facility in Orange County, which would be completed by the second half of 2022.
“Therefore, upside to ER’s earnings could come from better-than-expected gross gaming revenue at Resorts World Catskills and RWHV and if it is awarded (as part of the Kambi consortium) a mobile sports betting licence in New York State (outcome to be announced by end-2021),” the brokerage added.
Genting Malaysia shares rose one sen to RM3.20 at midday break with 6.1 million shares traded. – Bernama, October 13, 2021
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