Taking a bet on Genting Malaysia will yield positive outcome

Genting Malaysia Bhd (GenM) touched a 52-week high of RM2.94 late February this year. However, its good run didn’t last and fell to a low of RM2.20 in mid-October, back to levels seen in November 2020.

Year-to-date, the counter fell some 13.8% and exacerbated by the lawsuit filed by RAV Bahamas Ltd. RAV is seeking over US$600 million (RM2.57 billion) in damages related to Resorts World Bimini's operations.

The complaint, lodged on Oct 7 in the US District Court for the Southern District of Florida, was served on GAI, Genting’s indirect subsidiary, on Oct 11. The casino operator said the group is currently preparing a comprehensive legal response, which will be filed with the court in the coming weeks.

The lawsuit revolves around a shareholder dispute, with RAV Bahamas, a long-time partner in the Bimini resort project through joint venture BB Entertainment Ltd, alleging breaches of shareholder agreements.

GenM described the claims as "malicious and baseless", and contended that RAV Bahamas and its principals are attempting to extract an unjustified payment and inflict reputational harm.

GenM also responded to Bursa’s queries on the issue by saying that GAI, which is incorporated in Delaware, is not classified as a major subsidiary under the Bursa Malaysia Main Market listing requirements.

The combined operations in the US and the Bahamas contributed RM1.88 billion to the group's total revenue in the financial year ended Dec 31, 2023.

Legal suit aside, GenM posted a strong financial performance. It reported a 75% jump year-on-year in net profit to RM82.2mil in 2QFY24. This brings 1HFY24’s bottom line to RM140 million, representing a 7.1-fold y-o-y increase.

Going forward, consensus forecasts that GenM’s net earnings will increase to RM742.1 million in FY Dec 2024 and RM978.1m in FY Dec 2025. In terms of valuations, this implies prospective price earnings multiple of 17.6x for FY24 and 13.3x for FY25.

The legal suit will probably be a long drawn battle but in the meantime, GenM should benefit from expected rise in footfall to its casino and resort.