KUALA LUMPUR: Genting Malaysia Bhd's (GENM) pursuit of a casino licence in New York could be affected by a legal complaint filed by its joint-venture partner in Florida, according to CGS International Research.
Oct 14, GENM announced that its subsidiary GAI has been named in a complaint filed by RAV Bahamas Ltd on Oct 7 before the US District Court Southern District of Florida, which involves the operations of Resorts World Bimini (RW Bimini) in Bahamas. RAV is seeking damages in excess of US$600 million (RM2.6 billion).
RW Bimini is owned and operated by BB Entertainment Ltd (BBE), in which GENM indirectly holds 78 per cent interest whilst RAV holds the remaining 22 per cent interest. GAI is an affiliate company of BBE.
According to a report in the Tribune, RAV is alleging that GENM used its majority ownership in BBE, plus board and management control, to funnel hundreds of millions of dollars in liabilities incurred elsewhere in its global empire on to Bimini resort's books.
In GENM's announcement with Bursa Malaysia Securities, GENM said the complaint is baseless and totally without merit, and that it will vigorously defend against the complaint.
CGS International research said the development comes amid concerns over the complaint filed by the Nevada gaming regulator against Resorts World Las Vegas, which is operated by Genting Bhd, GENM's parent company.
Despite these challenges, CGS clarified that its valuation remains unaffected, as it has not accounted for any potential upside from GENM's New York casino bid.
"We only include GENM's land at book value in our sum-of-parts (SOP) valuation," it said in a note today.
The firm said that key re-rating catalysts for GENM include stronger-than-expected performance from Malaysian operations and improved operating margins.
On the downside, risks include higher-than-anticipated operating costs and a slower recovery in Malaysian tourism, which could negatively impact Resorts World Genting (RWG).
CGS has maintained its "Add" rating for GENM, citing robust three-year earnings per share (EPS) compound annual growth rate (CAGR) forecast of 42 per cent for financial year 2023 to 2026 (FY23-FY26).
This projection is supported by the recovery in tourism and continued growth in RWG's revenue.
At the time of writing, GENM's share price was up one sen or 0.45 per cent to RM2.24, valuing the group to RM13.30 billion.