KUALA LUMPUR (Oct 14): Genting Bhd’s (KL:GENTING) conditional voluntary takeover offer (VTO) bid to acquire the remaining 2.87 billion shares or 50.64% stake in Genting Malaysia Bhd (KL:GENM) drew mixed reactions as analysts’ views split between valuation concerns and strategic upside.
Maybank Investment Bank Bhd (Maybank IB) in a note on Tuesday (Oct 14) argued that the RM2.35 offer price undervalues GENM, failing to reflect several key catalysts that could materially lift its fair value (FV).
“First is the revaluation of its Miami land, acquired in 2011 [at a cost] of US$442 million ... GENM had attempted to sell it at a market value of US$1.2 billion in 2023. If the land is revalued, it will add 55 sen to our fair value,” said Maybank IB in the note.
The second catalyst is the potential sale of Empire Resorts’ non-gaming assets to the Sullivan County Resort Facilities Local Development Corporation, which could add 30 sen to its fair value.
The third is the potential award of a downstate commercial casino licence in New York, which could boost value by 48 sen per share after a 10% discount, with results expected by Dec 1, 2025.
TA Securities shared the negative stance, advising shareholders to reject the offer, noting that it is "not in the best interest of the Genting group” to delist GENM given its future fundraising needs.
“This is particularly relevant to GENM's plan to spend US$5.5 billion to elevate RWNYC if it wins the New York casino licence,” said TA Securities in its separate note.
While Genting could easily raise its stake to 50% through open-market purchases, TA Securities noted that achieving the 75% threshold required for privatisation could prove difficult, given the unattractive offer price.
The research house estimated the offer price implies an undemanding EV/EBITDA multiple of 6.4 times FY2026 earnings, compared to regional peers’ average of 8.4 times.
“The chance of Genting revising the offer price higher is slim, as there is no incentive for GENM's board of directors to seek any competing offer,” the firm added.
Shares of GENM surged over 10% to RM2.36 in early trading on Tuesday, before easing to end the day at RM2.32, still up 8.4%. This values the company at RM13.15 billion.
Meanwhile, Genting rose nearly 6% to RM3.06 at the opening, before closing 5.24% up at RM3.01, giving the company a market capitalisation of RM11.59 billion.
Earlier this year, both stocks were excluded from the FBM KLCI benchmark index and have struggled to regain pre-pandemic valuations, partly due to investor concerns over related-party transactions, including GENM's acquisition of the loss-making Empire Resorts from Genting’s founding family.
CGS International and HLIB favour acceptance
Conversely, CGS International and Hong Leong Investment Bank (HLIB) advised shareholders to accept the offer, citing the premium to target prices (TPs) and a timely exit opportunity.
CGS International said the offer provides “a good opportunity to exit” as it is above its target price of RM1.88 and the group could face higher operating and capital costs at RWNYC if it secures the New York licence.
“We think Genting’s management believes Genting Malaysia’s [value] is higher than what the market is willing to ascribe ... and would rather privatise it now. We reckon there is also a possibility that Genting could relist GENM in the future after possibly restructuring it and when there is more positivity towards its earnings outlook,” CGS said in its notes.
However, it also cautioned that the privatisation may fail, as many shareholders are sitting on paper losses, with the offer price below its RM2.50–RM3.00 trading range between 2022 and 2024 and offering less than a 10% premium to the recent market price.
HLIB, in its brief note, also advised acceptance, saying: “We advise existing shareholders to accept the offer is higher than our previous SOP-derived TP of RM2.06 — representing a 14.1% premium.”
The offer — launched on Tuesday — values GENM at approximately RM13.6 billion and would enable Genting to fully consolidate earnings from its flagship Resorts World Genting Highlands and the Resorts World New York City (RWNYC) operations owned by Genting New York LLC (GENNY).
Genting said it does not intend to maintain GENM's listing status should the acceptance level cause the group to fall below the 25% public shareholding spread.