Genting Malaysia Acquires Stake in US-based Empire Resorts

Genting Malaysia has decided to make another substantial investment in its US-based subsidiary, Empire Resorts. This recent investment of US$100 million brings the total investment in Empire Resorts to an impressive US$724 million. However, this significant financial commitment has led analysts to question the wisdom of the decision, given the lack of profitability demonstrated by Empire Resorts in recent times.

The investment of US$100 million entails Genting ER II LLC, an indirect wholly-owned subsidiary of Genting Malaysia, signing a Subscription Agreement to acquire “Series M Preferred Stock” of Empire, valued at up to US$100 million. Of this funding, US$58 million will go towards repaying a bank facility, while the remaining US$42 million will be used to boost working capital.

Empire Resorts currently operates the Resorts World Catskills (RWC) in New York, Resorts World Hudson Valley (RWHV), and a mobile sports betting platform that launched in March 2022. Genting Malaysia holds a 49% stake in the company, with the remaining stakes owned by Lim Kok Thay’s Kien Huat Realty III Ltd, the largest shareholder of Genting Malaysia. If Genting Malaysia decides to convert all available stocks, its shares in Empire Resorts will increase to 89.6% by the financial year 2030.

Despite the company’s claims that the new funds will help Empire reduce financial leverage and expenses while focusing on maximizing operations in the US, analysts from Nomura remain skeptical about the investment decision, particularly due to Empire’s recent lack of profitability. Another cause for concern is the absence of shareholders’ approval for the transaction. It is anticipated that Genting Malaysia’s partners will incur losses of MYR128 million (US$28 million) in 2023 and MYR103 million (US$22 million) in 2024.

Analysts Tushar Mohata and Alpa Aggarwal do not foresee significant changes in stock prices following the new investment, as Genting Malaysia’s Malaysian IR, Resorts World Genting, continues to recover. However, they expect a strong performance in the Dec quarter of 2023 and further improvements in FY24, driven by Malaysia’s recent visa waiver for Chinese and Indian tourists. Additionally, Asia Gaming Brief reports that this investment follows Genting’s bid for one of three licenses in New York, competing against major industry players such as Las Vegas Sands, MGM, Caesars, and Wynn. If granted, license holders will be required to achieve $2 billion in revenue and $600 million in profit annually.