Shares of Genting Malaysia Bhd fell as much as 10 per cent today over concerns that its proposed acquisition of casino operations in the UK from its Singapore affiliate was too risky.
Genting shares dropped 28 sen, the most in nine years, to hit a low of RM2.46 before recovering to RM2.62 as at 12.15pm. OSK Research has also cut its fair value for Genting shares from RM3.15 to RM2.55 and downgraded the stock from “Buy” to “Sell”.
Malaysia's sole casino operator had proposed to acquire the casino operations in UK (Genting UK) from its affiliate company Genting Singapore Plc for about RM1.7 billion. It had also separately proposed to develop a video lottery facility at the Aqueduct “racino” which combines racing with casinos.
OSK Research said in a report today that it felt the acquisition and development cost was not compensated by meaningful earnings growth prospects. It also said that there was inherent risk of future “value destructive related party transactions” and as a consequence is attaching no value to the group’s net cash balance.
“We view these developments negatively as the relatively high acquisition and development cost is not compensated by meaningful earnings accretion to the group despite Genting UK casinos’ long established operating track record,” said OSK Research.
It said that it was “cautious” on the medium-term viability of the US racino project pending more details on the development expenditure of the Genting bid.
It also noted that the winning bidder has to pay an upfront US$300 million (RM971 million) in non-refundable payment, which could be deemed a licensing fee.
“As such, we think that the cost of development could easily exceed RM1 billion,” said OSK. Genting said in a statement yesterday that the proposed acquisition of Genting UK complemented its long-term international expansion plans. The acquisition however will have to be approved by Bank Negara and the British Gambling Commission.
S.African businessman gets 7 months' jail for cheating at RWS casino
SINGAPORE : A 33-year-old South African businessman has been sentenced to seven months' jail for cheating at the Resorts World Sentosa (RWS) casino.
Sibongile Arthur Mgxashe had committed the offences at two different roulette tables on different days.
Deputy Public Prosecutor Gay Hui Yi told District Judge Thian Yee Sze that he first entered the casino at around 10:41pm on May 20 this year.
Mgxashe went to one of the roulette tables and placed his bet after the winning result was declared. As a result, he received cash chips amounting to S$7,000.
Mgxashe received another S$7,000 in cash chips the next day by using a similar method to cheat at another roulette table. However, he was soon detained by security as he was walking out of the casino.
Mgxashe originally faces six charges in total but four of them were taken into consideration. He could have been sentenced to a maximum of 10 years' jail and fined for each cheating charge.