Genting shares tumble most since 1998 on rights issue plan

Genting shares plummeted to their lowest level in 28 years following the announcement of a renounceable rights issue. The gaming giant, controlled by Malaysian billionaire Lim Kok Thay, plans to raise about RM1.25 billion (US$306 million) through the rights issue. The stock fell by 17% to RM1.56, marking the biggest decline since 1998.

The rights issue will be issued at a discount ranging between 25% to 30%, according to a bourse filing by Genting. The proceeds will be used to repay borrowings and fund working capital. This move comes as Genting faces mounting debt and declining profitability. In August, the gaming giant reported a net loss for the second quarter, while total borrowings rose to RM45.3 billion as of June end.

Analyst Samuel Yin from Maybank Investment Bank warned that the rights issue could result in minimal interest savings, de-gearing, and significant dilution in earnings per share and book value per share. Yin also expressed the possibility of more equity fundraising efforts or reduced dividends, leading to a downgrade of the stock to a sell from a buy recommendation.

The exercise is particularly concerning, as it suggests that Genting may struggle to refinance its borrowings into longer-dated ones. Genting Malaysia Bhd., a unit of the group, fell by as much as 8.1%, the highest decline in over a year. Fitch Ratings downgraded Genting to BBB- in September, anticipating a slower pace of deleveraging due to substantial capital expenditure required to expand key properties in Singapore and New York.

In 2022, Genting's Resorts World obtained a license to operate a casino in New York City, expected to generate billions in revenue.