Key Points
- Genting shares took a massive hit, plummeting 22.87% to RM1.45, the worst single day in the company’s history.
- More than RM1 billion of the RM1.25 billion raised will be used to pay off debt and interest payments; a lot of people are not going to be too happy about this.
- Just as the market was getting excited about the price crash, Maybank suddenly decided to sell out; then to make matters worse the CEO decided to buy 400,000 shares.
Genting’s Shares Plummet to a 19 Year Low as Most of the RM1.25 Billion Cash Call Ends Up in Lenders Pockets
Genting Bhd shareholders were asked for RM1.25 billion last Friday but by Monday the market had already begun to turn on the company. The stock closed at RM1.45 on 12 October, down 43 sen or 22.87%, its lowest level since April 2007. This one-day hit saw over RM1.6 billion just vanish in one session, leaving the group worth around RM5.58 billion. Gentings’ record of the slide shows it had a worse trading day before as a listed company, so what exactly spooked investors into this kind of reaction?
Where is all that Cash is Really Going?
The answer is hidden in the fine print, which the company was only forced to reveal after Bursa Malaysia asked some pointed questions last week (14 October). Of the RM1.25 billion, or $306 million, RM800 million is going to be used to pay back borrowings that are coming due within the next 12 months. Another RM429.5 million is called working capital, while RM20.5 million is for actually doing the deal.
When pressed to be more specific, Genting finally revealed that RM280 million of the new fresh equity would be going straight to creditors to cover interest payments and other costs. Only RM149.5 million is actually going to be used for general working capital across Genting and its other smaller subsidiaries. Take the two bits of money going to creditors and you’re looking at over RM1.08 billion going to pay off debts. When asked to explain the 25% to 30% discount on the deal, Genting argued it was a necessary evil, to encourage people to get on board and secure the full amount.
A Dime Against a Very Big Wall
Looking at the balance sheet the amount of money going to creditors, even after the recent cash injection, remains dismally small. Genting has a massive RM45.25 billion in borrowings and a healthy RM17.64 billion in cash. However, short-term borrowings have more than doubled over the last year to RM9.68 billion, and it’s all due to be paid back within a year.
Given this figure, even the RM800 million repayment barely scratches the surface, just clearing under 8.3% of near-term maturities. CIMB Securities reckons that the deal will save Genting a mere RM41.3 million in interest per year based on a weighted average of 5.16%. They estimate that the net gearing will only come down from 102% to 94%, saving a paltry RM41.3 million in interest every year is basically just a drop in the ocean compared to the RM280 million set aside just to service its debts.
Brokers Disagree Over the Extent of Damage
The move came from Maybank Investment Bank, which trimmed Genting to sell with a target of RM1.49. Analyst Samuel Yin pointed out that the rights issue indicates a lack of success in refinancing itself to longer-dated debt. “However, we also cannot rule out any equity fundraising moves or lower dividend payout,” Yin noted in his report.
CIMB Securities maintained its hold recommendation despite not sounding very comfortable with it: “Nobody likes a rights issue.” Its example of a one-for-four entitlement at RM1.30 suggests core earnings dilution of 17% to 18% for the financial years of 2027 and 2028.
PublicInvest Research saw the contrary view and referred to the move as a better option for raising money as compared to borrowing. Recently, downgrades by Fitch, Moody’s and S&P have already affected Genting’s cost of funding.
The CEO Who Bought the Dip
While everyone panicked with red screens, the chief executive did otherwise. On Monday, Tan Kong Han purchased 400,000 shares at RM1.58 and RM1.54 per share. Thus, he increased his direct holdings to 1.89 million shares, accounting for roughly 0.049% of the group’s stock. Tan’s previous buy on 29 September cost him RM1.87 – an extremely high price to pay now.
Queens and Sentosa Make Up the Bill
A lot of debt comes from a costly bet in Queens, New York. Resorts World New York City is in the middle of a US$5.5 billion capital expansion programme, following the approval of the full casino licence. Phase one of the expansion with live table games opened in April, while the second phase construction started in July. There will be a 1,200-room Crockfords Hotel, a new 400-room tower, and a 7,000-seat arena.
The early results of Genting’s subsidiary showed some success in earning revenue. Although Resorts World New York’s US and Bahamas revenues surged by 166.2% in the second quarter, the quarterly net profit amounted only to RM27 million.
There is nothing good coming out of Singapore, since Resorts World Sentosa continues losing ground to Marina Bay Sands. JP Morgan reported that luck-adjusted gaming share dropped to a historic low of 25% by the end of 2025.
Circuit Breakers and An Embarrassing Recollection
By 11.26 am, the fall was significant enough to trigger a circuit breaker on Bursa Malaysia’s intraday short selling rules. This came after Genting Malaysia fell 15.97% to hit RM1.23. As a result, Bursa Malaysia stopped intraday short selling until the end of trading that day.
RM1.23 has the uncomfortable memory of November 2025, when Genting Malaysia made an offer to acquire more than 50% of Genting Malaysia at RM2.35 per share. The price of the company’s stock is now almost half of that.
What Minority Holders Will Have To Do Next?
Kien Huat Realty, Kien Huat International, and Lim Keong Hui have committed themselves to buy 45.1% of the new share issuance. Underwriters will take care of the remaining amount, and thus the entire RM1.25 billion would be assured regardless of the decision of the minority holders. The approval of the deal will come from the extraordinary general meeting, and the transaction is expected to be completed by the first quarter of 2027. What remains now is for minority holders to choose among subscribing, selling the rights, or receiving a smaller proportion.
Expert Analysis: Shareholders Are Paying the Lenders First
Our expectations are more pessimistic than the RM2.38 consensus price target. There may be many people who agree or even disagree with us. We don’t think investors have punished Genting for increasing the equity; rather, they punished Genting for how they use the money. When one calculates the interest cost, RM1.08 billion out of RM1.25 billion will be paid to creditors. In our opinion, the minority shareholders are being required to pay the lenders first and to grow next.
Moreover, we doubt the sequence of the capital allocation in Genting’s business. Last year, cash was allocated to increase control over Genting Malaysia at RM2.35 per share. Now, the same group claims they need additional cash to settle their obligations including the financing costs. The purchase of RM624,000 by Tan is an encouraging sign but seems to be too little against the RM45 billion debt burden.
What makes the true test is whether the profit in New York comes earlier than the rating agencies lose patience. If CreditSights is correct about the sales of the land, we don’t see how this would be the last uncomfortable announcement from Genting.
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