A free theme park for Genting?
Bad news in two places for Malaysian-based gaming operator Genting.
First, U.S.-based Fox Entertainment Group, which recently withdrew from a deal to develop a theme park at Resorts World Genting in Malaysia, says it’s untrue that the Walt Disney Company, which plans to buy Fox, forced its hand in the matter because of the presence of a casino in the complex. In fact, says Fox, the Malaysian “simply made up” the claim.
In a separate statement, Disney said the claim is “utterly without merit,” but the company is well-known for its efforts to keep casinos out of Orlando, Florida, home of its Disney World entertainment center. Disney will acquire 21st Century Fox assets for around $71.3 billion, reported CalvinAyre.com.
Genting has filed a US$1 billion-plus lawsuit in U.S. District Court in Los Angeles and is suing both Fox and Disney as well as related companies. If Genting prevails, reported GGRAsia, the proceeds could end up paying for the whole theme park. A note from Maybank Investment Bank Bhd says Genting has spent US$750 million so far.
The Borneo Post reports that Genting will continue to work on the theme park, despite the loss of a theme (Fox had planned a Hollywood-style motif). But the snafu means the opening date could be delayed beyond the planned first half of 2019, AffinHwang Capital projects.
“We have lowered our visitation rate forecast with the assumption that an outdoor theme park will open its doors in 2020,” the research firm said. But it’s not all bad news. “In our view, even without a branded theme park, visitation growth is still sustainable, albeit not as strong as previously forecasted,” the firm continued. “As an indication, prior to the refurbishment, the ‘old’ theme park managed to attract circa 2 million to 2.5 million visitors a year. Overall visitation for the first nine months of 2018 is up 14 percent year-on-year, even without the presence of the outdoor theme park.”
Genting is looking for $1 billion for breach of contract and breach of “implied covenant of good faith and fair dealing.”
Genting believes that Disney could have forced the issue because of its anti-gambling stance. The theme park was meant to be a Fox-branded venue, a first for Fox. However, Disney is set to and, because Resorts World Genting contains a casino, it reportedly doesn’t want to get involved.
The day after the lawsuit was filed in late November, shares in Genting dropped 16.7 percent.
Also last week, Genting Malaysia posted a third-quarter net loss of 791.7 million Malaysian ringgits (US$190 million), which the company attributed to a problematic investment in a proposed Indian casino in the U.S. state of Massachusetts.
The publicly traded operator, best-known for its mountaintop Resorts World Genting casino and theme park complex outside Kuala Lumpur, wrote off US$426 million (MYR1.8 billion) in the quarter following a September ruling from the U.S. Interior Department overturning an Obama-era decision to place 321 acres in trust for the Mashpee Wampanoag Tribe to build a gaming resort in the town of Taunton about 40 miles south of Boston.
The tribe is suing the department, but in a filing with Bursa Malaysia, Genting said it was not certain it will recover ever the money, which is in the form of loans to the tribe.
“However, the group continues to work closely with the tribe on options which include legislation being introduced in the U.S. Congress which, if passed, will entail the U.S. federal government to reaffirm the land in trust,” the company said. “The impairment loss can be reversed when the promissory notes are assessed to be recoverable.”
Beyond that, in operational terms it was a strong quarter for the company, a majority held subsidiary of global resort conglomerate Genting Group. Highlights included a 15 percent increase in revenues year on year to MYR2.6 billion (US$623.8 million), mainly attributable to mass-market resilience and higher VIP hold at Resorts World Genting, which posted a 91 percent increase in adjusted EBITDA to MYR641.2 million on a 26 percent jump in revenues.
Addressing the main concern of investors at the moment, the company said it doesn’t expect its recent legal troubles with Walt Disney Co. and Twenty-First Century Fox to impact business.
Genting is suing the companies for US$1 billion for pulling out of an agreement to develop a massive theme park at Resorts World. The park, which was supposed to open a year ago, has been plagued by construction delays and has already cost the company some $750 million.
As one investment analyst put it, “Minus the impairment, Genting’s operational numbers are all right. Investors will definitely look beyond these numbers. It is the Fox theme park which will weigh on the stock price.”
