This article first appeared in The Edge Malaysia Weekly on December 12, 2022 - December 18, 2022
Whenever there is a crisis, Genting Malaysia Bhd (GenM) tends to be the company within the group that is used to buy assets from the Lim family. Nothing seems to have changed.
Last week, GenM announced the acquisition of convertible preference shares worth US$100 million (RM440.5 million) in US-based Empire Resort Inc from Kien Huat Realty III. Kien Huat Realty III is wholly-owned by Golden Hope Ltd as trustees of the Golden Hope Unit Trust.
The Lim family, which is a major shareholder of Genting Bhd, controls Golden Hope Unit Trust. Genting holds 49.4% in GenM.
Analysts are generally negative on the transaction because it increases the exposure of GenM to Empire Resort, which operates casinos and resorts in the Catskills Mountains that is located 90 miles from New York City.
The Empire operations have been loss-making over the years. Although the top line has seen improvements with a growing number of visitors to the Catskills Region, competition in the region is also heating up.
As for GenM, the latest subscription of the convertible preference shares will increase its total investments in Empire to US$624.4 million. If Empire does not redeem the convertible preference shares that are due in 2030, GenM will end up with 76.3% of the New York-based entity.
Does GenM need the exposure in New York? It certainly does not.
The money can be better used to improve its business in countries where its operations are profitable and growing. Alternatively, it can be returned to shareholders in the form of dividends.
This is not the first time GenM has invested in a company that is owned by the Lim family. In 1996, it invested in the Hong Kong-based cruise business in which the family had majority control.
GenM finally exited Genting Hong Kong Ltd in 2016. According to reports, GenM’s returns from its investments in the company did not commensurate with its investments of close to RM4 billion.
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