The takeover bid, which is not subject to shareholder approval, will cost RM6.7 billion ($2.05 billion) should Genting manage to buy out all the shares.
The announcement instantly whipped up investor interest in the casino operator, sending its share price soaring to a seven-month high of RM2.35. And it drew the investing public’s attention to GenM’s bid in New York and a rosy picture has emerged. The debts of loss-making Empire Resorts and corporate governance issues of the past seem to have been shoved aside.
Some investment analysts, including Maybank Investment Bank (IB) and TA Securities, are recommending that their clients reject the offer simply because GenM is worth more than RM2.35.
“Investors should not accept the VGO, in our view,” says Maybank IB, telling its clients in a research note to not accept the offer even though the price “appears a tad attractive”.
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Maybank IB highlights that three potential catalysts could eventually boost GenM’s valuation: the potential win of a casino licence in New York, the likelihood of a revaluation of a parcel of waterfront land in Miami that it wanted to sell for US$1.2 billion last year and the potential sale of non-gaming assets in Empire Resorts.
The research house estimates that the casino licence will boost GenM’s valuation by an extra 55 sen per share while the revaluation of the Miami land will add 48 sen per share.
In a “blue sky” scenario, assuming that Empire Resorts is able to sell its non-gaming assets to the Sullivan County Resort Facilities Local Development Corporation at US$525 million ($680 million), Maybank IB’s fair value for GenM would go up to RM3.28.
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Meanwhile, TA Securities comments that the offer price, which works out to an implied acquisition EV/Ebitda (enterprise value to earnings before interest, tax, depreciation and amortisation) of 6.4 times based on earnings in the financial year ending Dec 31, 2026 (FY2026), is “unattractive when benchmarked against regional peers’ average of 8.4 times”. Its forecast core net profit is RM836.1 million for FY2026 and RM1.153 billion for FY2027 on revenue of RM12.34 billion and RM13.02 billion respectively.
It will be a rosy picture for GenM if everything pans out accordingly.
A sure thing in New York?
Coincidentally, Las Vegas-based MGM Resorts International, one of the four bidders for a casino licence in New York, announced that it had withdrawn from the race two days after Genting launched its takeover offer.
The news adds a further boost of optimism as GenM’s chances of winning the licence are higher now. The New York Gaming Facility Location Board is expected to issue up to three licences.
“The newly defined competitive landscape — with four proposals clustered in a small geographical area — challenges the returns we initially anticipated from this project,” MGM said in a statement last Tuesday.
GenM is now competing with two rivals — Metropolitan Park, owned by hedge fund manager Steve Cohen, and Bally’s Corp whose owner Kim Soo is in the midst of taking over Australian casino operator Star Entertainment. There were initially eight parties in the running for the casino licences in New York.
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New York state is not new to GenM. Its subsidiary, Resorts World New York City (RWNYC), has been running a racino (video gaming machine facility) at the Aqueduct Racetrack there for more than 10 years. This gives GenM a first-mover advantage over its two competitors.
“With prior investments in additional gaming space, RWNYC is positioned to open the first phase of its casino by June 2026, just six months after the issuance of its licence. Supported by the Hyatt Hotel, RWNYC can cater for VIP players who prefer to stay overnight. This represents a lead of at least four years ahead of any greenfield development,” says RWNYC in the executive summary of its proposal to the New York authorities.
According to RWNYC, the other two proposals, which are greenfield proposals, will open in June 2030. Hence, RWNYC stresses that in those four years, it is projected to generate about US$11.5 billion in gross gaming revenue and US$5 billion in tax revenue for New York state.
“For every additional year that the greenfield proposals are delayed beyond 2031, RWNYC will continue to generate US$4 billion of gross gaming revenue and US$1.7 billion in taxes a year,” it says.
RWNYC is offering to pay US$600 million as the casino licence fee (US$100 million more than the minimum) as stated in the summary, and a tax rate of 56% for slots and 30% for table games, which are the highest rates among states with substantial gross gaming revenue. These tax rates will result in US$1.7 billion of casino taxes in 2031, the largest in the US.
“Granted that the licence starts in June 2026, RWNYC will propel New York to the second-largest state in gross gaming revenue. More importantly, New York will collect the most casino taxes in the nation, due to the high tax rates offered by RWNYC,” says the proposal.
RWNYC forecasts that its full casino, which will have a built-up area of 3.4 million sq ft and house 6,000 machines and 800 tables, will be ready by 2029 — a year before its rivals. RWNYC says it will strategically use the four-year head start to strengthen its brand image and establish a robust, long-term player database and a comprehensive loyalty ecosystem that grows in value over time, deepening customer engagement and retention.
The large tax collection will be an indicator of the potential earnings that GenM will make from a full-fledged casino in New York. Judging by this, it is not hard to fathom why some analysts are upbeat about a casino licence in the state. Nonetheless, it requires a huge investment outlay to earn such big money in the Big Apple.
RWNYC has committed a total investment of US$7.5 billion (about RM31.7 billion), of which US$5.5 billion will be spent on building the full-fledged casino and the remaining sum allocated to 30-year community programmes.
Take it or leave it
Should GenM’s minority shareholders hold on to their shares, particularly those whose investment cost was more than RM2.50 per share?
“In our view, we recommend investors to accept the offer as it is above our target price and offers a good opportunity to exit as we think that GenM will incur higher opex (operational expenditure) and capex (capital expenditure) at RWNYC as it bids for a New York downstate casino, leading to lower earnings growth and dividend cuts,” CGS International says in a research report.
The research house retains its “reduce” call on GenM, with an unchanged sum of partsbased target price of RM1.88. “We think the market has not priced in the slowdown in its earnings growth and cut in dividends,” it says, in explaining its target price.
PhillipCapital concurs that the takeover offer is an opportunity for investors to exit the stock, even though the offer price “appears less compelling from a valuation standpoint”. The reason being GenM’s subdued earnings outlook amid persistent cost pressures.
“Escalating operating and labour costs across all key markets are expected to weigh on earnings, with earnings likely to moderate in 2H2025,” it explains.
The research house says the planned US$5.5 billion New York Downstate casino expansion will require significant capex that could require additional borrowings. It notes that any additional debt may heighten interest expenses, further limiting balance sheet flexibility and potentially constraining dividend payouts.
As at June 30, GenM’s total borrowings amounted to RM13.06 billion, including RM12.77 billion of long-term debts, against a cash balance of RM3.28 billion. This translates into a net gearing ratio of nearly 90%. GenM’s net borrowings have more than tripled in five years from RM3.52 billion at end-2019, partly due to the acquisition of financially stressed Empire Resorts from its controlling shareholder Tan Sri Lim Kok Thay.
Taking up the multibillion-dollar casino project in New York is likely to stretch GenM’s balance sheet, not to mention the cash required to sustain the loss-making Resorts World Catskills housed under Empire Resorts.Investment analysts expect Empire Resorts to be in the red for at least the next three years. Its net losses came in at US$53.1 million in FY2024 and US$57 million in FY2023.
Nonetheless, GenM has made an effort to address its mounting debt that strains its cash flow. It is looking for buyers for its waterfront land in Miami and Empire Resorts’ nongaming assets to pare down debts. However, the Sullivan County Resort Facilities Local Development Corporation has encountered funding issues while the sale of the waterfront land has yet to materialise. The Genting group has invested billions over the years trying to cement its foothold to earn American gambling dollars but the returns are far from impressive compared with its hilltop casino at home. Will GenM be dealt a royal flush this time?
