CreditSights said tResorts World New York has received support from the local community.
PETALING JAYA: There is a “good chance” for Genting Bhd
to win a downstate casino licence in New York City, according to a research firm of Fitch.
CreditSights said this is underpinned by Resorts World New York’s (RWNY) established presence in New York for 14 years and the fact that RWNY has received support from the local community.
Currently, eight out of the 10 other licence bidders face opposition from local communities.
RWNY, a subsidiary of Genting Group, is one of two licensed racinos in New York City’s metropolitan area.
Racino refers to the combined business of video slot machines and horse racing tracks.
With an established track record since 2011, CreditSights said RWNY can rely on its existing infrastructure and ramp up the new casino quicker than its competitors.
This will translate into quicker economic benefits and tax revenues reaped by the New York state government
“Our view is aligned with market consensus, that two of the three licences will be won by racino incumbents RWNY and MGM Resorts, with the last licence up for grabs by the other bidders.”
The New York State Gaming Commission will soon award three new downstate New York Class III casino licences to eligible operators.
Authorised in 2022, bidding for the licences will begin in June 2025 and are likely to be awarded between October 2025 and March 2026.
With a Class III licence, RWNY can host all table games with physical dealers, which it cannot operate with its Class II licence currently.
“We have factored in a casino licence win by RWNY into our projections for the financial years of 2025 to 2026 (FY25 to FY26), mainly reflected in the spike in FY26 capital expenditure that we expect to be majorly debt-funded.
“In turn, we anticipate Genting New York and Genting Malaysia Bhd (GenM)/Genting Bhd to post a deterioration in credit metrics in FY26 and FY27, before improving thereafter as the new downstate casino opens,” said CreditSights.
CreditSights initiated coverage on Genting with a “market perform” recommendation.
It also initiated coverage on GenM with an “outperform” recommendation.
The research house noted Genting is exposed to “some governance risks” in the form of extensive related-party transaction (RPT) risks.
This was particularly due to its weak associate Empire Resorts (ERI) – through GenM – and the history of default at a sister company.
“While we acknowledge GenM’s comparatively weaker leverage metrics, free cash flows, and scale of earnings before interest, taxes, depreciation and amortisation (Ebitda), along with exposure to RPTs with a weak subsidiary ERI, we think current valuations are generous,” said CreditSights.
Meanwhile, Philip Capital Research downgraded its rating on GenM to “hold”, noting the stock is “losing its shine”.
Target price was also lowered to RM1.85 per share.
It expects GenM’s earnings will continue to be weighed down by Ebitda margin compression, higher depreciation and interest expenses, and associate losses.
“While GenM is trading at an inexpensive valuation, we believe it is likely to remain as a value trap.”
The value trap situation may persist unless a major catalyst emerges – such as securing the New York City downstate casino licence.
“Should GenM secure the licence in 2025, we estimate an Ebitda uplift of RM240mil to RM310mil in 2026, adding 25 to 33 sen per share to our valuations.
“However, until then, margin pressure, associate losses, and rising depreciation charges are likely to cap earnings upside,” stated Philip Capital Research.
