Genting Loses Its Lustre: RM1.25bil Rights Issue Explained

Quick Answer: Genting Bhd (KL:GENTING) called for a rights issue to raise RM1.25 billion, pushing its share price to a 52-week low of RM1.38. The group holds a cash hoard of more than RM17.6 billion, which makes the cash call hard for shareholders to justify. Rating agencies say the rights issue helps, but a sale of non-core assets is still needed to deleverage.

For a generation of investors, Genting Bhd (KL:GENTING) was a cash-generating machine that could weather any storm. It survived economic turmoil and the pandemic.

The group started with a single casino in Genting Highlands, Pahang. It has since expanded to Singapore, the UK, the US and the Bahamas under executive chairman Tan Sri Lim Kok Thay.

What Is Genting Bhd’s RM1.25 Billion Rights Issue?

Genting Bhd rights issue and share price fall — Genting Bhd’s rights issue has put the group’s debt strategy under scrutiny.

Genting called for a rights issue to raise RM1.25 billion, the lowest point in the group’s history. The cash call is hard to explain given a cash hoard of more than RM17.6 billion and a business that draws thousands of tourists and high rollers.

The Genting Highlands casino was the cash engine that funded overseas expansion and dividends. That history is why the call surprised shareholders.

Genting Loses Its Lustre: RM1.25bil Rights Issue Explained — Photo: KLSE Screener

Why Did Genting’s Share Price Hit a 52-Week Low of RM1.38?

Shareholders did not take the rights issue lightly. The share price fell to a 52-week low of RM1.38 last Wednesday before recovering some lost ground.

Research analysts have turned negative, citing concerns over more cash calls to pay off debts. Investors and analysts have followed that view.

Does Genting Plan More Cash Calls?

The company says no further cash calls are planned at present. The concern is that debt repayments could still force more fundraising.

Is the Rights Issue a Shift Away From Genting’s Debt Reliance?

Genting has traditionally relied heavily on debt funding. Some see the rights issue as a welcome move to reduce and refinance its borrowings.

The exercise signals that shareholders are prepared to share the deleveraging burden. That is a shift from a model where the cash machine carried the balance sheet alone.

What Must Genting Do Beyond the Rights Issue?

Rating agencies say a rights issue alone is not enough. They argue that a sale of non-core assets is crucial to deleverage.

Stocks to monitor on this story include:

Non-core asset sales: whether Genting announces disposals that cut borrowings
Cash call announcements: any new fundraising beyond the RM1.25 billion rights issue
Debt refinancing: progress in reducing and refinancing the group’s borrowings
Share price levels: how the stock trades relative to its RM1.38 52-week low

Key Takeaways

Genting Bhd (KL:GENTING) called for a RM1.25 billion rights issue, its lowest point in history.
The share price fell to a 52-week low of RM1.38 before recovering some ground.
The group holds a cash hoard of more than RM17.6 billion.
Rating agencies say a sale of non-core assets is crucial to deleverage.

Frequently Asked Questions

How much is Genting Bhd’s rights issue?

Genting Bhd called for a rights issue to raise RM1.25 billion. The company says no further cash calls are planned at present.

Why did Genting shares fall to RM1.38?

The share price fell to a 52-week low of RM1.38 last Wednesday after shareholders reacted to the rights issue. Research analysts cited concerns over more cash calls to pay off debts.

How much cash does Genting have?

Genting holds a cash hoard of more than RM17.6 billion, according to the source article. That figure is why many shareholders found the cash call hard to understand.

Is Genting’s rights issue a move to cut debt?

Some see the rights issue as a welcome shift away from Genting’s heavy reliance on debt funding. Rating agencies say a sale of non-core assets is still needed to deleverage.

This article is for general information only and does not constitute investment advice. Always do your own research before making any investment decision on Bursa Malaysia.

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