KUALA LUMPUR (Oct 17): A generation of investors grew up believing that Genting Bhd (KL:GENTING) was a cash-generating machine where nothing can go wrong even during the worst of times.

It survived economic turmoil and the pandemic. A stock favoured by 'mom and pops' for its regular dividends, the cash from Genting’s only casino in Malaysia was enough to fund its expansion overseas and keep shareholders happy.

From a single casino in Genting Highlands, Pahang, the group, headed by executive chairman Tan Sri Lim Kok Thay, expanded to Singapore, the UK, the US and Bahamas.

The relentless expansion comes with a price.

Genting fell to the lowest point in its history last week when it called for a rights issue to raise RM1.25 billion.

With a cash hoard of more than RM17.6 billion and a business that draws thousands of tourists and high rollers, Genting’s cash call is unfathomable.

Shareholders did not take it lightly, with research analysts calling for a sell on concerns of more cash calls in the future to pay off debts. Consequently, Genting’s share price fell to a 52-week low of RM1.38 last Wednesday before recovering some lost ground.

The company says that there are no further cash calls being planned currently.

But investors and analysts have turned negative on Genting.

However, there is also a view that the rights issue is a welcome shift away from Genting’s traditional heavy reliance on debt funding to reduce and refinance its borrowings. It effectively indicates that shareholders are prepared to fork out money to share the deleveraging burden.

However, rating agencies say that Genting needs to do more than a rights issue. A sale of non-core assets is crucial to deleverage.

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