PETALING JAYA: More than RM4bil was wiped off the cumulative market value of the Genting group of companies’ three listed stocks in Malaysia and Singapore in a trading day as investors reacted negatively to the latest corporate developments related to the companies.
The casino operators emerged among the top losers in the Malaysian and Singaporean stock exchanges yesterday, with Genting Singapore Ltd suffering the biggest slump.
On Bursa Malaysia, shares of parent company GENTING BHD fell 15 sen or 2.16% to RM6.80, making it the seventh-biggest decliner yesterday. Its 49%-owned subsidiary, Genting Malaysia Bhd, saw a three sen or 0.91% decline to RM3.25.
The drop in share price of both companies came a day after Genting Malaysia confirmed its purchase of the controversial Equanimity superyacht, formerly owned by fugitive businessman Low Taek Jho, for US$126mil (RM514.6mil). The announcement has since drawn mixed comments from industry observers.
On April 3, Genting also announced that its indirect wholly owned subsidiaries, Resorts World Las Vegas LLC and RWLV Capital Inc, have priced their US$1bil, 4.625% senior notes to finance the development of the Resorts World Las Vegas casino and integrated resort.
Across the causeway, Genting’s 52.7% subsidiary, Genting Singapore, plunged to a three-month low and lost 9.35% or 10 cents to 97 cents. This effectively erased about S$1.2bil (RM3.6bil) from the company’s market capitalisation.
The panic selling of Genting Singapore shares seemed to be a result of the Singaporean government’s decision to hike casino entry levies for citizens and permanent residents from April 4.
The share price also fell after the casino operator unveiled a S$4.5bil expansion plan on April 3 for its Resorts World Sentosa.
Since early 2018, the shares of Genting, Genting Malaysia and Genting Singapore have generally been on a downtrend. Genting recorded a decline in net profit in financial year 2018 (FY18), while Genting Malaysia fell into the red in FY18.
Genting Singapore was on a better footing, as the company reported a stronger bottom line in FY18.
In Malaysia, equity analysts were mixed on Genting Malaysia’s purchase of the Equanimity superyacht.
The superyacht was purchased by Genting Malaysia at a 51% discount to its previous owner’s purchase price and was close to the government’s targeted minimum price of US$130mil.
Genting Malaysia said in a filing with Bursa Malaysia that the acquisition would allow the company to differentiate itself from its competitors, apart from providing Genting Malaysia with a unique and competitive edge for its premium customer business.
Hong Leong Investment Bank said it was “mildly positive” on the multi-million-dollar purchase, as the superyacht would be able to complement Genting Malaysia’s VIP casino segment by ferrying high-rollers to its casino and renting for private functions.
“With the purchase of Equanimity, our estimated net gearing would increase to 11% (from 9%) on a proforma basis, which is palatable.
“We do not impute any earnings contribution from the purchase of the Equanimity, as this impact is expected to be minimal on the bigger scheme of things,” the brokerage said in a note yesterday.
RHB Research Institute was also positive on the acquisition, adding that the superyacht’s maintenance and cruise operation costs would be manageable.
“Based on media sources, the government has so far spent RM14.5mil to maintain Equanimity since reclaiming it 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 RM5mil to RM6mil, we believe this is manageable, in view of the company’s FY18 operating cash flow of RM2.8bil,” it said.
However, CIMB Research was not in favour of the Equanimity purchase.
“We view this news negatively as Genting Malaysia is not in the superyacht and cruise liner business. Maintain ‘hold’. FY19-FY21 earnings per share could potentially fall by 3.4% to 5% if Genting Malaysia is unable to generate any revenue contribution from Equanimity.
“The re-rating catalyst is the opening of the new outdoor theme park in 2019 and positive earnings contribution from Equanimity, while the de-rating catalysts are the new theme park failing to open in 2019 and losses from Equanimity,” stated CIMB Research.