Genting Malaysia, a prominent casino and resort operator, has made a significant investment in its US subsidiary, Empire Resorts, despite the company’s recent financial losses. The latest injection of funds amounts to a hefty US$100 million and brings Genting Malaysia’s total investment in Empire Resorts to a staggering US$724 million. This massive financial commitment has raised concerns among industry analysts, who are questioning the wisdom of such substantial investments in a struggling subsidiary.
The investment was made through Genting ER II LLC, a wholly-owned subsidiary of Genting Malaysia, which signed a Subscription Agreement to acquire “Series M Preferred Stock” of Empire Resorts, worth up to US$100 million. Out of this sum, US$58 million will be used by Empire Resorts to repay a bank facility, while the remaining US$42 million will boost the company’s 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 was launched in March 2022. Genting Malaysia holds a 49% stake in the company, with the remaining shares owned by Lim Kok Thay’s Kien Huat Realty III Ltd, the largest shareholder of Genting Malaysia.
Analysts from Nomura have expressed skepticism about the investment, citing Empire’s lack of profitability in recent years. They also noted that shareholders’ approval was not required for the transaction. It is projected that Genting Malaysia’s partners will incur losses totaling MYR128 million (US$28 million) in 2023 and MYR103 million (US$22 million) in 2024.
Despite these concerns, Genting Malaysia remains optimistic about the investment, asserting that it will enable Empire to reduce financial leverage and expenses and focus on maximizing its operations in the US.
Meanwhile, industry analysts Tushar Mohata and Alpa Aggarwal do not anticipate major changes in stock prices as a result of the new investment, as Genting Malaysia’s Malaysian IR, Resorts World Genting, is still in the process of recovering from the impact of the pandemic.
The investment comes as Genting Malaysia vies for one of three casino licenses in New York, competing against major industry players such as Las Vegas Sands, MGM, Caesars, and Wynn. If successful, the operators will be required to generate $2 billion in revenue annually, with a profit of $600 million. Despite the uncertainties surrounding the investment, Genting Malaysia is forging ahead with ambitious plans for its US subsidiary.