Genting Malaysia

10 August   2019

Dear Fellow Investor,

Today I will review Genting Malaysia a share we hold for our managed accounts. On 6 August they announced they were buying a 35 % stake in Empire Resorts, a US casino operator in New York.  It was a related party transaction by Genting as they are an  owner of Empire Resorts.  The market reacted by panic selling  dropping at one point from RM 3.60 to 3.02.  

A related party transaction  is usually viewed negatively as it means the owner of the shares is offloading a personally owned bad asset and dumping it on existing shareholders  REITS run by crooked managers are known for this as they dump personally owned unproductive property into the REIT and the existing  shareholders are cheated.  

The perception by the crowd was extremely negative so panic selling resulted but in my opinion I do not see any material impact on Genting Malaysia or Empire Resorts.

Genting Malaysia has 7.9 billion cash on their balance sheet and the investment cost of the Empire Resorts  shares is USD 128.6 million not much more than the USD 126 million paid for the Equanimity acquisition . When the Equanimity purchase was announced, Genting Malaysia shares did not react. (For our foreign clients, Equanimity was a super yacht owned by Joe Low seized by the Malaysian  government to help cover losses  sustained in the 1MBD fraud case)  Genting intends to charter the Equanimity to rich tourists but in my opinion I do not think it has the cash flow potential of Empire Resorts.

 I reviewed the financials of Nasdaq listed Empire Resorts  and they had losses in the last financial year reflecting  extensive renovation of their property. Moving forward this renovation should attract more customers.

This was noted by TA securities on a research note.  For this reason I am currently neutral on Genting Malaysia  as Empire Resorts/ Genting Malaysia  continue to generate strong cash flows.

One positive item was that in early March 2019 Genting CEO Lim Kok Thay bought 7.341 million and 6.090  million Genting Malaysia shares.  

If there was a problem with the company, he would have sold not bought. A few days after he bought the shares it was announced Genting  had made a resolution with Fox and Disney to drop their theme park law suit. Insiders tend to know more about their company then the public.

On Wednesday- Sunday next week  I will be in Sandakan and Kota Kinabulu for company visits but you can always email/ whats AP  me should you have any questions.

I will not publish this report next Saturday .

Invest well and grow your wealth
Bill

 

 

Critter of the week is in a wildlife tourism center in Sandakan: Hopefully we can visit.