In a recent filing, Genting Malaysia announced that it will invest an additional $100 million into its U.S. subsidiary, Empire Resorts, based in New York state.
Genting controls 49 percent of Empire, which operates Resorts World Catskills (RWC); a mobile sports betting operation that launched in March 2022; and Resorts World Hudson Valley (RWHV), which opened in December 2022.
Genting said the move will “reinforce its position and grow its market presence in the expanding New York State gaming market” and enable it to “compete effectively in the northeastern U.S. region.”
In addition, it stated, “this will allow quicker ramp-up for RWHV and enable Empire to continue its focus on strengthening RWC’s operating performance to realize its full potential.”
The Catskills property will “continue benefiting from operating synergies with Resorts World New York City,” Genting’s slot casino in Queens, the company continued. The latter property is considered a strong contender for the first full-scale casino license in New York City.
The new equity infusion takes Genting’s total investment in Resorts World to $724 million since 2019.
According to Inside Asian Gaming, $58 million will be used to repay an existing bank facility, with the $42 million balance earmarked for working capital. Resorts World’s majority owner is Kien Huat Realty III Ltd., the family trust of Lim Kok Thay, Genting Malaysia’s largest shareholder.
Nomura analysts say investors will take a dim view of the move, given that Resorts World isn’t making money. The analysts project losses of $28 million for 2023 and $22 million in 2024, “mainly due to the continuing share of losses from Empire.”
Even so, Nomura’s Tushar Mohata and Alpa Aggarwal say the losses could be offset by the continuing recovery of Resorts World Genting, the company’s flagship resort in Kuala Lumpur.
“We expect the recent recovery in Genting Malaysia’s share price to continue and expect the December quarter to be seasonally strong,” they wrote, “with further improvements expected in FY24 with Malaysia’s recent visa waiver to Chinese and Indian tourists. There are clear operational/yield improvements in all assets, and losses from underperforming assets are narrowing.”
Maybank responded to the news by cutting its earnings forecast for Genting Malaysia by $8.6 million and expanding its debt projections to $100 million. Analyst Samuel Yin Shao Yang said the bank does “not look kindly” on the move, since the Hudson Valley resort is “loss-generating.”
That said, Yin has raised his target price for Genting Malaysia slightly and maintains a “buy” rating, partly based on the company’s potential to win a downstate commercial casino license.
