PETALING JAYA: Genting Malaysia Bhd (GENM) has ramped up its bet on New York’s gaming sector with its proposed takeover of Genting Empire Resorts (GERL), a move that some analysts say may backfire on the group.
The deal has been flagged as expensive and potentially profit-dilutive by analysts and will likely be a financial drag on the integrated gaming and resort operator.
The takeover also raised eyebrows as it is a related party transaction (RPT) involving the Genting group’s founding Lim family led by Lim Kok Thay, who is also GENM’s deputy chairman and chief executive.
According to its 2024 annual report, the 73-year-old Lim and his son, Keong Hui, 40, have a deemed interest of 49.35% in GENM as of March 17, 2025. Keong Hui is the group’s deputy chief executive and executive director.
GENM is acquiring the remaining 51% stake in GERL that it does not own for US$41 million (RM177 million) from the Lim family’s vehicle Kien Huat Realty III Ltd. The group currently holds a 49% interest in GERL, which wholly owns Empire Resorts Inc (ERI) that has gaming properties in New York state.
As part of the deal, Kien Huat Realty III will also assign a US$39.7 million (RM170 million) debt to GENM that ERI owes to it.
ERI owns and operates integrated casino Resorts World Catskills and video lottery terminal Resorts World Hudson Valley, along with mobile sports betting platform Resorts World Bet.
GENM’s RM3.1 billion investment
GENM’s investments in ERI prior to the latest acquisition totalled US$724.4 million (RM3.1 billion), after it made several capital injections through common and preferred stocks in recent years.
Public Investment Bank (PublicInvest) has downgraded GENM to a “trading sell” from “neutral” in light of the proposed acquisition.
In a recent note, it said the deal was an “unfavourable” RPT that suggests “corporate governance remains a concern” for the group.
It views the group’s US$724.4 million investment in ERI as “financial assistance” to ensure the company remains operational under a competitive business environment in the US.
PublicInvest noted that ERI remains a loss-making unit since GENM’s initial acquisition back in 2019. “After more than five years, the group has failed to turnaround ERI.
We view this related party transaction negatively as it is likely to drag the group further with a higher share of losses,” it said.
It added that between FY2020 and FY2024, GENM recognised total associated losses of RM160-RM280 million a year, the bulk of which it attributes to ERI.
Meanwhile, US research firm CreditSights said the group’s takeover of GERL is “credit negative” due to the increased debt to support ERI’s weak earnings outlook, and concerns over related party transactions.
CreditSights, a Fitch Solutions company, said the deal will increase GENM’s debt by US$300 million (RM1.3 billion) and worsen its leverage metrics by 0.3 to 0.4 times.
It also said ERI’s earnings outlook remains weak, pressured by competition and losses at its two New York resorts.
However, it expects ongoing support for ERI from GENM as it has invested almost US$725 million in the business and views it as key to its New York expansion, lowering the refinancing risk for its US$300 million bond due in 2026.
GENM’s shares closed 1 sen or 0.6% lower at RM1.73 yesterday, valuing the group at RM10.27 billion. Year to date, the counter has fallen 23%.
