PETALING JAYA: Genting Malaysia Bhd
’s proposed purchase of the remaining 51% membership interest in Genting Empire Resorts LLC is fairly priced although it is expected to be profit-dilutive.
Hong Leong Investment Bank (HLIB) Research said it would also put additional strain on the group’s balance sheet.
“We are slightly negative on the proposed transaction,” it said in a report.
However, it said following a 26% share price correction since the release of its latest quarterly results, it was upgrading Genting Malaysia to a “hold” from “sell,” albeit with a lower target price of RM1.80 from RM1.99 previously.
The downward revision primarily reflects the application of a 15% holding company discount, in light of the recently proposed acquisition, it added.
At the time of writing, the stock was at RM1.73 a share.
HLIB Research noted that gaining full membership of Empire Resorts would allow for more cohesive brand positioning under the Resorts World umbrella, enabling more effective cross-marketing initiatives between Resorts World New York City and Empire Resorts’ assets.
The consolidation is expected to unlock operational synergies, including the integration of customer databases and enhanced cost efficiencies, ultimately driving revenue growth and improving overall returns across both assets, it added.
At the current purchase consideration of US$41mil (RM172mil) for a 51% membership interest in Empire Resorts, the transaction is deemd fair as it falls within
the independently assessed market value range of US$36.5mil to US$46.9mil for the common stock of Empire Resorts, as determined by an independent valuer appointed by Genting Malaysia to evaluate the company's equity value.
Post-annual report adjustments, HLIB Reserach said it raised its FY25 and FY26 forecasts by 5% and 1%.
“That said, we have not incorporated the proposed acquisition into our model, pending its anticipated completion in the second quarter of this year,” it added.
