PETALING JAYA: Analysts generally welcome Genting Malaysia Bhd
’s (Genting Malaysia) wholly owned US-based unit Empire Resorts Inc’s plan to sell its non-gaming assets, buy land, cut debt and reduce expenses.
They said the move will enhance Empire Resorts’ capital structure and could boost Genting Malaysia’s earnings next year (FY26) by as much as 24%.
Last Friday, Empire Resorts proposed to sell its non-gaming assets comprising the 332-room Resorts World Catskills (RWC) hotel, 99-room Alder Hotel, 18- hole Monster Golf Course, 2,500-seat RWC Epicenter and multiple restaurants to Sullivan County Resort Facilities Local Development Corp (Sullivan County) for US$525mil or about RM2.2bil.
With the proceeds, Empire Resorts plans to buy 1,554.6 acres of land from US real estate investment trust EPR Properties for US$201.3mil and redeem its US$300mil 7.75% senior unsecured notes due Nov 1, 2026.
“These proposals are expected to enhance Empire Resorts’ capital structure following the full redemption of its US$300mil unsecured notes, resulting in Empire Resorts being debt-free. In addition, they would strengthen Empire Resorts’ asset base and secure long-term control over the 420 acres of land on which Resorts World Catskills’ gaming and non-gaming facilities are situated, as well as 1,134.6 acres of vacant land with development potential.
“The proposals are also anticipated to generate surplus cash of US$10mil for general working capital,” Hong Leong Investment Bank Research (HLIB Research) said in a report.
The research house estimated Empire Resorts will achieve annual interest cost savings of US$22.5mil, equivalent to 38% of its registered losses of RM252mil in 2024.
HLIB Research added that the lease payments under the proposed land lease with Sullivan County should be largely offset by the existing lease to EPR Properties.
“Overall, we estimate these proposals could lift our FY26 to FY27 profit forecasts by 10% and 8%, respectively, assuming the proposals are successfully implemented by end-FY25.
“As for its balance sheet, the group’s gearing ratio is projected to improve from 1.2 times to 1.1 times in FY26,” the research house said.
Maybank Investment Bank Research said it estimates the deals with EPR Properties and redemption of the notes will boost Genting Malaysia’s earnings by US$33.2mil or 24% of FY26 earnings.
The proposals, it calculated, could lead to a rise in Genting Malaysia’s target price to RM2.25 a share. For now it has maintained its target price of RM1.95 and downgraded the stock to a “hold”.
HLIB Research also kept its “hold” call on the stock with an unchanged TP of RM1.82 a share pending completion of the proposals.
The research house remains cautious on the stock due to its more recent history of reporting underwhelming results. The target price could be raised to RM2 a share upon completion of the deals, it added.
