Genting Bhd. shares plunged by the most in 28 years after the leisure group controlled by Malaysian billionaire Lim Kok Thay announced plans to raise about 1.25 billion ringgit ($306 million) through a renounceable rights issue. The stock fell as much as 17% to 1.56 ringgit, the biggest decline since 1998. The issue price will be fixed at a discount ranging between 25% to 30%, Genting said in a bourse filing on Friday. Proceeds will be used to repay borrowings and fund working capital.
The fundraising comes as Genting grapples with mounting debt and falling profitability. The gaming giant reported a net loss for the second quarter in August, while total borrowings rose to 45.3 billion ringgit as of end June.
"Our scenario analysis reveals not only minimal interest savings and de-gearing but also marked earnings-per-share and book value per share dilution," Samuel Yin, an analyst at Maybank Investment Bank, wrote in a report. He downgraded the stock to sell from buy, adding that more equity fundraising or fewer dividends cannot be ruled out. The exercise also signals that Genting may have limited success refinancing its borrowings into longer-dated ones.
The group's unit Genting Malaysia Bhd. fell as much as 8.1%, the most in more than a year. Fitch Ratings Inc. downgraded Genting to BBB- in September, citing slower deleveraging due to substantial capital expenditure needed to expand key properties, including those in Singapore and New York. Last year, Genting's Resorts World won a license to operate a casino in New York City that is expected to generate billions of dollars in revenue.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing