Genting Singapore to MGM: No Sale

Lim Kok Thay (l.), executive chairman of Genting Singapore, acknowledged last week that he was approached by MGM Resorts International with an “unsolicited” offer for his stake in the Malaysian casino operator. He did not pursue it. Stock values see-sawed on the news.

Genting Singapore to MGM: No Sale

Shares of Malaysian casino operator Genting Singapore jumped more than 9 percent July 15 on news that MGM Resorts International was circling the company with a takeover bid. Stocks then dropped 6.2 percent when Genting characterized the bid as “unsolicited,” and trading stopped after an inquiry from the Singapore Exchange.

The report, initially published by Bloomberg News, was based on unnamed sources who said MGM approached Genting Singapore Executive Chairman Lim Kok Thay. The Lim family controls parent Genting Berhad and owns 53 percent of its Singapore subsidiary, which runs Resorts World Sentosa (RWS), one of two integrated resorts (IRs) in the city-state. RWS currently has a market value of about S$9.7 billion (US$7 billion).

In addition to RWS, Genting Berhad also owns and operates casinos in the Bahamas, Malaysia, the Philippines and the United States, including Resorts World Las Vegas, Resorts World Catskills and Resorts World New York City.

RWS and its only competitor, Marina Bay Sands, a unit of the Las Vegas Sands Corp., opened in 2010. They recently won an extension of their gaming duopoly until 2030 in a very competitive bidding process that included MGM Resorts, in exchange for investments of S$4.5 billion (US$3.3 billion) each. Through 2025, RWS will boost its gross floor area by about 50 percent and add new attractions and entertainment along Singapore’s Greater Southern Waterfront.

Though the Lim family shrugged off the MGM offer, other potential suitors are reportedly looking at Genting Singapore, in part because of the market’s ongoing management of its recovery from Covid-19. Singapore’s “living with Covid” strategy has been held up as an example of successful coexistence with the virus, compared to the “zero-Covid,” stop-start model employed in Macau. That approach, which clamps down borders and businesses as a response to even minor outbreaks, has the world’s No. 1 gaming hub expected to generate zero revenue for the year, and its operators burning cash to pay the bills. Zero-Covid also has not successfully contained the spread of infection, as witnessed by the recent outbreak that reached almost 1,800 new cases since mid-June.

Genting Singapore, by contrast, has remained mostly profitable throughout the pandemic, and recently reported a 13 percent year-on-year revenue increase to S$315 million (US$225 million). In other good news, the Singapore Tourism Board said last week that it expects a bump in foreign visitors in the second half of this year.

In May, Genting Singapore reported a net profit of S$40.4 million (US$28.8 million) for the first quarter of 2022, up 17.3 percent from the previous quarter, for a 16.9 percent increase year-over-year.

The move by MGM Resorts, a U.S.-based company, reflects its growing interest in expanding its Asia holdings. MGM is the majority owner of Macau casino operator MGM China Holdings Ltd., with MGM Macau and MGM Cotai in its portfolio. It has also submitted an application to develop and operate a multibillion-dollar IR in Osaka, Japan. That bid was filed in April, with decision-makers expected to award the country’s first two casino licenses by the end of the year.

As of late last week, representatives of Genting and MGM had not explicitly commented on the Singapore offer. A spokesperson for the Singapore Ministry of Trade and Industry informed Bloomberg that, should an offer be considered, the local government would have to approve. To date, no request from Resorts World Sentosa to divest or change ownership has been received by the city-state officials, the source said.

Despite its interest in Singapore, MGM President and CEO Bill Hornbuckle insists that Macau will “forever be” the world’s top gaming market overall.

And according to Inside Asian Gaming, citing Japanese investment bank Nomura, Genting Berhad is “unlikely to consider selling any interest in Genting Singapore, due to its strategic importance and position as the group’s most profitable asset.”

Nomura analysts Tushar Mohata and Alpa Aggarwal said in a note that RWS “generated the highest EBITDA among all of Genting’s portfolios of gaming assets globally, both before and during the Covid-19 period. This comparison includes Malaysia’s Resorts World Genting which is the next largest contributor.

“Also, being present in Singapore offers much needed geographic diversification, and regulatory predictability to the group … case in point: the Singapore government raised gaming taxes in a gradual manner, with sufficient advance notice, as opposed to the Malaysian government raising gaming taxes by 10pp at one go.

“Genting Singapore is also the strongest group entity from a balance sheet perspective, with net cash of SG$3.1 billion as of end-2021, and dividends received from Genting Singapore help Genting Berhad to service interest on some of the latter’s borrowings.

“Financially, while any sale of its GENS stake could potentially provide a one-time windfall to Genting Berhad and help reduce gearing, we believe there is no similar accretive reinvestment opportunities for such a large cash windfall.”