MALAYSIA

Lawsuits, tax hikes dim outlook

A more than $1 billion legal dispute with Walt Disney Co. and Fox Entertainment over a planned theme park, legal action from Wynn Resorts and a nasty tax surprise made 2018 a roller coaster of a year for Genting Malaysia, with analysts slashing their forecasts for the group.

Genting, one of the world’s largest casino operators, filed the lawsuit against its U.S. partner in a planned park at its Resorts World Genting property. The Malaysian company is seeking more than $1 billion in damages for breach of contract after 20th Century Fox, whose parent is being bought by entertainment giant Disney, pulled out of the theme park venture.

“Unlike Fox, which was perfectly happy to have the Park situated a stone’s throw from the casinos of Resorts World Genting so long as it could continue to extract financial concessions from GENM, Disney wanted no association with a gaming company like GENM due to Disney’s “family-friendly” brand strategy, as evidenced by its well documented history of lobbying against the opening of gaming facilities near its parks,” the Genting lawsuit reads.

“But seller’s remorse—first by Fox and later by Disney—is not a valid ground for terminating an agreement,” it adds.

It was to have been the world’s first Fox theme park and was expected to be the crowning glory of an MYR10.4 billion ($2.4 billion), 10-year, masterplan to overhaul the Resorts World Genting property, with the hope of driving visitation both from home and abroad.

Nomura now says it has cut its visitation forecasts by 6 percent for 2019 and 2020 and slashed its theme park revenue forecast by 65 percent, resulting in a cut to earnings of 20 percent next year and the year after.

Maybank Kim Eng analyst Yin Shao Yang said he was cutting his earnings forecasts for Genting by 8 percent for 2019 and 10 percent for 2020. Though he added that the termination of the theme park accord is not the “end of the world” for Genting.

“Although the theme park will no longer be Fox-branded, we understand that its construction will continue and eventually operate as an “in-house” OTP,” he said, adding the company already has experience in running such attractions.

Genting has already invested $750 million of its own money in the park and is claiming additional damages. Maybank argues that if the company wins its lawsuit, it will essentially get the theme park for free.

Still, Disney has said the case is without merit and resolution is likely to be a long legal process. The 20th Century Fox name was also expected to be the crowd puller, helping the company meet its visitation targets of 30 million by 2020, from 20 million at present.

This wasn’t the only setback for Genting this year. The news followed hot on the heels of tax hikes announced in this year’s budget, which were double the level analysts had anticipated and which had already triggered a round of downward revisions to earnings.

Genting said it was reviewing its marketing strategy and cost structure to look for ways of offsetting the increases. The budget included a 10 percentage point increase in tax to 35 percent of gross gambling revenue, as well as hikes in annual license fees and dealer licenses.

Genting gets about 80 percent of its earnings from its Malaysian operations, where visitation has been growing helped by the rollout of new hotels and attractions under the Genting Integrated Tourism Plan.

But seller’s remorse—first by Fox and later by Disney—is not a valid ground for terminating an agreement.

The company also owns properties in the U.K., the Bahamas and New York. Genting Malaysia is a unit of Genting Bhd, which owns Genting Singapore and Genting Hong Kong,which control properties in Manila and Singapore, as well as a mega resort under construction in Las Vegas.

However, Genting Malaysia has had mixed fortunes in its forays overseas and analysts have generally been more upbeat about its prospects at home.

In December, Wynn Resorts announced it had filed suit against the Las Vegas resort, claiming the design was too similar to its own nearby property and was likely to mislead customers.

Another of its planned projects in the U.S. ran into legal trouble earlier in the year, forcing it to examine ways of recovering a $426.3 million investment into promissory notes issued by the Mashpee Wampanoag Tribe in Massachusetts.

Genting appoints CEO’s son as deputy in management shakeup

Genting Bhd has announced a series of changes to its management structure, including the appointment of Lim Keong Hui, the son of Chairman and CEO Tan Sri Lim Kok Thay as deputy CEO.

The younger Lim, 34, has been in various positions within the Genting Group since 2009 and most recently held the post of executive director. The changes also included the retirement of Deputy Chairman Tun Mohammed Hanif Bin Omar and Chief Financial Officer Chong Kin Leong.

Wong Yee Fun, who was appointed as deputy CFO in January last year, will take on the role of CFO.

MQ Tech scraps $30m Cambodia project

MQ Technology Bhd has scrapped its plans to develop a $30 million theme park, casino and hotel complex in Cambodia.

The company had previously entered into a Memorandum of Agreement with Cambodian Resorts and Entertainment Co Ltd (CRE) to develop the resort – which would be situated in Banteay Chakrey in Prey Veng Province, in the southeast of Cambodia close to the Vietnam border.

However, MQ Technology said the MOA with CRE has lapsed.