Genting Malaysia’s $41M Empire Resorts Acquisition, A Bold Move or Financial Gamble?

In the gaming industry, Genting Malaysia Bhd (GENM) is creating a stir with its proposed US$41 million (RM175.5 million) acquisition of Empire Resorts Inc. In the financial community, this daring move that will give GENM complete ownership of Empire Resorts has generated both enthusiasm and skepticism. Empire Resorts provides GENM with a means of securing its place in the American gaming industry, especially with its Resorts World properties in New York. However, considering Empire Resorts’ history of financial losses, the deal carries a number of serious risks. Either GENM’s resources were overextended or the acquisition was a strategic success.

Although GENM has been a major player in the Asian gaming market for a long time, its investments in Empire Resorts have not yet produced the expected returns. GENM has had a number of difficulties in making the American subsidiary profitable since purchasing a 49% share in Empire Resorts in 2019. It is unclear how the deal will affect GENM’s financial performance in the long run, as Empire Resorts reported yet another round of losses in FY2024. Regulatory obstacles, high debt, and competition have all been problems for Empire Resorts. Thus, it is still unclear if this acquisition will help GENM dominate the US market or drive the business further into debt.

Related Information Table: Empire Resorts Acquisition Details

Sources:

• Genting Malaysia Bhd Official Site: Genting Malaysia , instagram

Is the Purchase of Empire Resorts a Risky Move or a Step in the Right Direction for Growth?

Despite multiple capital infusions from its stakeholders, Empire Resorts has been a losing business for over 20 years. In order to become a fully owned subsidiary of Empire Resorts, GENM has now agreed to pay US$41 million for the remaining 51% of the company. This purchase comes after Empire Resorts saw a number of capital expenditures totaling US$724.4 million. Even though GENM is still dedicated to Empire Resorts’ future, the agreement has its own set of difficulties, particularly given Empire Resorts’ ongoing struggles with excessive debt and poor profitability.

The assumption of Empire Resorts’ US$39.7 million debt, including interest, by GENM is a key component of the agreement. Though some analysts think the risks related to Empire Resorts’ finances may outweigh the benefits, the acquisition aims to streamline operations and cut costs at Resorts World Catskills. Although the US$41 million purchase price has been judged to be within a fair valuation range, there are still unanswered questions about the deal’s potential financial effects. There are still questions about whether Empire Resorts can make money under GENM’s direction, despite a valuation done by CBRE Securities LLC.

Is the Cost of the Empire Resorts Purchase Justifiable?

There has been much discussion about the acquisition’s financial effects. Hong Leong Investment Bank Bhd (HLIB) analysts are worried about how this deal might affect GENM’s financial situation. Although they admit that the acquisition might result in operational efficiencies and synergies, they caution that Empire Resorts’ losses might worsen and reduce GENM’s potential for profits. According to HLIB, GENM’s portion of Empire Resorts’ losses could rise by RM23 million in FY2025, which would mean a 3.5% decline in earnings over the following three years.

PublicInvest Research is still pessimistic about the acquisition, in addition to the expected increase in borrowings and higher interest rates. Due to market cannibalization from the Resorts World Hudson Valley property, which opened in 2022, they have downgraded GENM’s stock to “Trading Sell” and changed their target price to RM1.66. PublicInvest is dubious about the acquisition’s long-term sustainability and blames Empire Resorts for a large portion of GENM’s continuous losses. These analysts think that given the ongoing difficulties facing the U.S. subsidiary, the acquisition might cause GENM’s recovery to be further delayed.

A Future for GENM and Empire Resorts: Prospects or Challenges?

The future of GENM is uncertain, particularly given the competition and growing operating expenses the company must contend with in the US gaming market. Increasing Resorts World Catskills’ gaming revenue is essential to turning Empire Resorts into a profitable business. In an effort to spur growth, GENM intends to broaden its demographic appeal and optimize its business processes. However, considering the complicated regulatory landscape and possible economic slowdown, this strategy’s success is far from assured.

The performance of Empire Resorts will also be impacted by outside variables, such as changing laws and the growing number of rivals in the US gaming market. GENM has previously issued a warning, stating that it is uncertain whether Empire Resorts will be able to sustain a positive trajectory in terms of both financial performance and operational stability. Furthermore, there are significant risks to the company’s future success from the possible effects of regulatory changes as well as the erratic earnings from gaming.

Is GENM’s Acquisition Strategy a Revolution or a Lost Chance?

The purchase of Empire Resorts by GENM marks a significant turning point in the company’s efforts to establish itself as the industry leader in gaming in the United States. Although there is room for expansion, there are also serious risks associated with the deal. Regarding the acquisition’s long-term effects, analysts are still split. While some believe Empire Resorts may continue to struggle, others anticipate that the complete integration of the Resorts World brand will ultimately be advantageous.

It will take time to determine whether GENM’s purchase of Empire Resorts will prove to be a brilliant move in its strategy for international expansion or an overly ambitious one that could put additional strain on its financial situation. Whether the acquisition will help GENM overcome its obstacles or prove to be a costly setback will be determined in the coming years.