Genting Has No Good Reason to Sell Singapore Arm, Says Bank

Posted on: July 19, 2022, 04:17h. 

Last updated on: July 19, 2022, 05:35h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Aside from a one-time cash infusion, Genting Berhad has little reason to divest its Singapore unit, which owns the Resorts World Sentosa integrated resort.

Genting
Resorts World Sentosa. Nomura analysts say owner Genting Singapore has no good reason to sell itself. (Image: Resorts World Sentosa)

That’s the sentiment of analysts at Japanese investment bank Nomura, who in a Monday note say Genting Singapore should not consider selling itself outright, or even entertain the idea of a partial divestment to another company. The analysts’ reasoning is simple: Resorts World Sentosa is the most profitable venue in the sprawling Genting gaming empire.

RWS generated the highest EBITDA among all of Genting’s portfolios of gaming assets globally, both before and during the COVID-19 period. This comparison includes Malaysia’s Resorts World Genting which is the next largest contributor,” write the Nomura analysts.

The analysts’ take on Genting Singapore arrives several days after reports surfaced that the Lim family, which controls Getting Berhad and 53% of the Singapore unit, held takeover discussions with MGM Resorts International (NYSE:MGM) that ultimately didn’t produce a deal.

Plenty of Opinions on Genting Singapore Fate

Resorts World Sentosa is one of just two integrated resorts in Singapore, with the other being Marina Bay Sands, itself one of the most profitable gaming venues in the world.

Genting and Las Vegas Sands have multi-decade duopoly protection, making the city-state an attractive destination for suitors. However, the Nomura analysts say the parent company has more to gain from fully retaining Genting Singapore than it has by selling even a partial interest in that unit.

“Also, being present in Singapore offers much-needed geographic diversification, and regulatory predictability to the group … case in point: the Singapore government raised gaming taxes in a gradual manner, with sufficient advance notice, as opposed to the Malaysian government raising gaming taxes by 10pp at one go,” add the analysts.

Still, other research firms note it’s possible Genting Berhad could entertain selling a minority stake in the Singapore entity to raise cash. That capital infusion would be used to reduce leverage and potentially make a move on a Macau concessionaire, according to analysts.

Other Reasons Not to Sell Genting Singapore

In a Monday filing with the Singapore Stock Exchange, Genting quashed rumors that it’s holding ongoing discussions with other suitors. The company also acknowledged that Tan Sri Lim Kok Thay, executive chairman of Genting Berhad, received an unsolicited takeover offer from an unidentified company. But MGM wasn’t mentioned.

The regulatory document could be a sign that Genting Berhad is, in fact, planning to keep the Resorts World Sentosa in its portfolio. It has compelling financial reasons to do just that.

“Genting Singapore is also the strongest group entity from a balance sheet perspective, with net cash of SG$3.1 billion as of end-2021, and dividends received from Genting Singapore help Genting Bhd to service interest on some of the latter’s borrowings,” conclude the Nomura analysts.