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Shareholders of Genting Malaysia Bhd voted yesterday in favour of resolutions to acquire the British casino operations collectively known as Genting UK from Genting Singapore plc despite initial misgivings over the related party transaction nature of the deal.

It is understood that shareholders mainly asked questions on the rationale for the acquisition and on profitability, as Britain is not seen as a growth market due to prevailing economic conditions and tougher operating conditions.

“Shareholders wanted more clarification on the acquisition and whether it’ll be profitable,” a shareholder said, adding that HSBC Nominees and Cartaban Nominees called for a poll before the voting.

The vote was 60.39% or 1.17 billion shares, for the acquisition, which was worth RM1.67bil. Genting Malaysia, the owner and operator of Resorts World Genting, is 47.33% owned by Genting Bhd, which also owns a 52% stake in Genting Singapore.

The over-lapping shareholding among certain institutional shareholders in Genting Malaysia and Genting Singapore could have been a major catalyst in the way the voting turned out as it did. Blackrock Fund Advisors and Vanguard Group Inc were among those with stakes in both companies.

A man walks past a Genting signboard at Genting Highlands. Genting Malaysia shareholders have approved the purchase of Genting UK. — Reuters

Genting and its chairman cum chief executive officer Tan Sri Lim Kok Thay did not take part in the voting.

An analyst with a foreign investment bank told StarBiz that the voting pattern showed that these shareholders preferred to see the British casino operations, which faced quite a few obstacles including higher taxes and a tougher operating environment, under Genting Malaysia.

Analysts in recent reports said the British casino operations were a better fit for Genting Malaysia rather than for Genting Singapore.

As for Genting Singapore, the analyst said this would look good for the company, which would be able to concentrate on the integrated resort business.

Moreover, the gaming industry in Singapore was recently re-rated with Genting Singapore showing sterling results.

A market observer noted that in a situation where there were overlapping institutional investors and better prospects in Singapore, it was “normal to make Genting Malaysia a sacrificial lamb to help Genting Singapore”.

He added that based on the number of shares, it appeared that these institutional shareholders were quite active in voting.

Meanwhile, Genting Malaysia deputy chairman Tun Mohd Haniff Omar said all proposals to expand the business were looked at based on merits by the company’s board, including those involving related party transactions.

“We’ve this opportunity in Europe (with Genting UK), we hit the ground running with a going concern that is already cash flow positive following the remedial measures taken by Genting Singapore,” he said.

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Genting Bhd posted a 26.3% lower net profit of RM214.50mil for the second quarter ended June 30 against RM291.04mil for the previous corresponding period.

The company told Bursa Malaysia the lower profit was due to the share of loss in jointly-controlled entities and associates of RM30.6mil.

This arose mainly from the share of loss of jointly-controlled entity Genting Singapore Plc (GENS) of RM49.6mil as a result of the reduced value of a property owned by GENS in London, it said.

Its lower profit was also due to impairment loss incurred on the investment in Star Cruises Ltd (amounting to RM30.4mil) and the lower one-off gain of RM1.4mil compared with RM31.4mil net gain arising from the dilution of the company’s shareholding in GENS and Genting Malaysia Bhd (formerly Resorts World Bhd).

Its revenue fell 2.6% to RM2.10bil from RM2.16bil a year ago. Earnings per share (EPS) was at 5.8 sen versus 7.86 sen previously. It has declared a 3 sen dividend.

Genting said its performance in the second half may be impacted by the projected turnaround in the global economy, preparation for the opening of its integrated resort in Singapore and performance of its Meizhou Wan power plant that had been affected by lower-than-expected tariff increase.

Except for its power division, all its divisions – leisure and hospitality; plantation; property; and oil and gas – recorded lower revenue and profit, it said.

The improved profit in the power division was mainly because of higher revenue and lower operating costs incurred by the Meizhou Wan plant, primarily due to lower coal prices.

In the first six months, Genting reported a net profit of RM427.6mil on revenue of RM4.17bil, compared with RM730.5mil and RM4.32bil respectively in the previous corresponding period.

Genting Malaysia, in a separate statement, said its net profit fell 14% to RM330.5mil for the second quarter ended June 30 compared with RM384.3mil in the previous corresponding period as a result of weaker luck factor in the premium players business and lower interest income.

Its revenue dropped 3% to RM1.2bil from RM1.24bil while EPS stood at 5.78 sen against 6.69 sen previously. Genting Malaysia declared an interim dividend of 3 sen.

In the first six months, it posted a net profit of RM605.9mil, down 11% from RM681.6mil in the same period last year. Revenue was higher at RM2.38bil compared with RM2.33bil previously.

“With the forecast turnaround in the global economic outlook, the group is cautiously optimistic of its prospects and expects performance for the rest of the year to be satisfactory,” it said.

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