AS expected, both Genting Bhd and Genting Malaysia Bhd are not spared from a knee jerk reaction following casino mogul Tan Sri Lim Kok Thay’s recent stepping down as Genting Hong Kong Ltd chairman and chief CEO on Jan 24 – just days after the company filed to wind up its business after the cruise operator failed to secure funding to pay off its debts.
Parent company Genting Bhd edged down 8 sen or 1.75% to RM4.49 with 3.92 million shares traded which gave the casino operator a market capitalisation of RM17.41 bil while its subsidiary Genting Malaysia Bhd slipped 7 sen or 2.46% to RM2.78 with 6.62 million shares exchanged hands, thus valuing the company at RM16.51 bil.
While such short-term repercussion is expected, investors familiar with the Genting Group are bracing that Lim will stick to the “divide and rule” strategy by treating Genting Hong Kong in which he holds a 76% stake in as “purely independent” from Genting Group’s other business operations in Malaysia and Singapore.
On paper, Genting Bhd, Genting Malaysia and Genting Singapore Ltd have no cross shareholdings with Genting Hong Kong.
But concerns abound about the Genting Group’s poor past track record with the tendency of bailout to recoup losses in the Hong Kong-based cruise operator.
Recall that in August 2019, Genting Malaysia forged ahead with a related party transaction (RPT) to acquire an effective 35% stake in cash-strapped US casino operator Empire Resorts Inc from its controlling shareholder Lim, 70, who is also the company’s CEO and chairman although such action was met with intense criticism.
Some RM3.27 bil of market capitalisation evaporated from Genting Malaysia as it came under fierce selling pressure since the announcement of the RPT that would cost RM538 mil cash. Genting Bhd, too, was not spared from heavy selling with RM2.54 bil in its market cap being wiped out.
Banking woes
The other concern is the substantial amount of shares that Lim has pledged. It has been reported that almost all of Kok Thay’s 76% stake or 6 billion shares in Genting Hong Kong is now committed – up from 5.5 billion shares he pledged in April 2020.
If Genting Hong Kong is wound down, Subang MP Wong Chen envisages that the Employees Provident Fund (EPF) and other government-linked investment companies (GLICs) will be impacted as they have substantial interest in the banks involved, namely Maybank, CIMB and RHB.
In a Facebook post, Wong mentioned that the banks had given unsecured loans totalling US$600 mil (RM2.5 bil) to Genting Hong Kong which now risks becoming a total loss.
Although these unsecured loans would not sink the banks, he said, they would nevertheless cause a “big dent” in their earnings.
Wong said the public had a right to know whether these unsecured loans were approved in a reckless manner. He also urged the bankers who approved them to step up and justify their actions immediately.
Maybank is majority-owned by Permodalan Nasional Bhd which is the premier government-owned fund management company while Khazanah Nasional Bhd – the country’s top sovereign wealth fund – is the controlling shareholder of CIMB.
Meanwhile, EPF has a majority interest in RHB. – Jan 24, 2022
