Bursa grills Genting Malaysia over US$41m Empire Resorts buyout

• The acquisition will turn Empire Resorts, the operator of Resorts World Catskills, Resorts World Hudson Valley, and Resorts World Bet in New York, from being GENM's 49%-owned associate to a fully-owned subsidiary.

KUALA LUMPUR (May 8): Genting Malaysia Bhd’s (KL:GENM) proposed US$41 million (RM175.5 million) acquisition to gain full control of the loss-making Empire Resorts Inc from Genting group's founding Lim family has come under the scrutiny of Bursa Malaysia Securities Bhd.

The bourse regulator on Thursday slapped GENM with 20 questions on the deal, which would see it buy the remaining 51% stake in Genting Empire Resorts LLC (GERL) that it does not currently own from Kien Huat Realty III Ltd. GERL owns Empire Resorts, while Kien Huat Realty III is owned by the Lim family, led by Tan Sri Lim Kok Thay.

The acquisition will turn Empire Resorts, the operator of Resorts World Catskills, Resorts World Hudson Valley, and Resorts World Bet in New York, from being GENM's 49%-owned associate to a fully-owned subsidiary.

Under the deal, Kien Huat Realty III will assign a US$39.7 million debt—including accrued interest—that Empire Resorts owes, to GENM.

Among the questions posed by Bursa were those that sought to clarify the rationale for the acquisition, justifications for its purchase price, whether any valuation was done on GERL, liabilities to be assumed by GENM, financial information on GERL and Empire Resorts, and their prospects.

In response, GENM said no separate valuation was conducted on GERL, as the relevant valuation should be on Empire Resorts. The planned US$41 million acquisition also falls within the independently assessed market value range of US$36.5 million to US$46.9 million for Empire Resorts, it said.

It said the valuation was performed by independent valuer CBRE Securities LLC on April 22, 2025, based on weighted average of discounted cash flow analysis (50%), precedent transaction multiples (35%) and public market comparables (15%).

GENM assured that no additional liabilities, including contingent liabilities and guarantees, will be assumed by the company, aside from paying the purchase price upon the deal's completion.

It also stated that GERL recorded a net loss of US$54.1 million for the financial year ended Dec 31, 2024 (FY2024), down from US$65.4 million in FY2023, but slightly higher than the US$53.4 million it incurred in FY2022.

Empire Resorts, meanwhile, posted a net loss of US$53.1 million in FY2024, lower than US$57 million in FY2023, but higher than US$44.2 million in FY2022. Annual revenue grew to US$296.3 million in FY2024 from US$292.2 million in FY2023, and US$267.3 million in FY2022.

Looking ahead, GENM said Empire Resorts will concentrate on increasing gaming revenues for Resorts World Catskills by broadening its demographic reach to key upstate markets. It would also continue to streamline its operations to rationalise costs.

However, GENM cautioned that there is no guarantee Empire Resorts will be able to maintain a positive trajectory in its financial and operational performance.

“Empire [Resorts]’s performance is subject to risks inherent in the gaming industry which may include, but are not limited to regulatory policy changes, volatility of gaming revenues and additional competition. Any economic slowdown may also have an impact on the business and its cash flows,” the company said.

GENM also stated that interested directors in the deal have and will continue to abstain from all discussions and vote on the acquisition at the group’s board meetings.

GENM first acquired a 46% stake in Empire Resorts, which has been loss-making for over two decades, from Kien Huat Realty III for US$128 million in cash in 2019. GENM's investments in Empire Resorts so far totalled US$724.4 million, following several capital injections through common and preferred stocks that were widely seen as financial aid rather than investments.

An unfavourable deal

Analysts tracking GENM have expressed concerns that the deal could negatively impact the group’s earnings, as they see little chance of Empire Resorts turning a profit anytime soon.

“Between FY2020 and FY2024, Genting Malaysia recognised total associated losses of RM160 million to RM280 million a year, which we attribute the bulk of to Empire Resorts," said PublicInvest Research in its note on Monday.

“We project that it would remain a loss-making operation of Genting Malaysia due to the cannibalisation of Resorts World Catskills following the opening of Resorts World Hudson Valley in December 2022,” the research house stated.

The proposed acquisition led PublicInvest to downgrade GENM to a “trading sell” and reduce its target price (TP) to RM1.66 from RM2.53, citing concerns that the deal would hinder the group’s weaker-than-expected earnings recovery, and that corporate governance remains a worry given the “unfavourable” related-party transaction.

The purchase consideration is deemed fair as it falls within the independently assessed market value range of US$36.5 million to US$46.9 million for the common stock of Empire Resorts, according to Hong Leong Investment Bank's note on May 5.

"However, the proposed acquisition is expected to be dilutive and will place additional strain on the balance sheet," added HLIB.

Among analysts tracked by Bloomberg, out of the 17 research firms covering GENM, six have “buy” calls, seven have “hold” recommendations, and four have “sell” ratings, with an average TP of RM2.16. CGS International gave it the highest TP at RM3.65, while Nomura has the lowest at RM1.60.

On Thursday, GENM's share price slipped one sen or 0.57% to close at RM1.73, giving the group a market capitalisation of RM9.81 billion. Year to date, the stock has dropped 23%.

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