GentingM, Genting see RM4.89b erased from market cap over US$1b suit

KUALA LUMPUR: Genting Malaysia Bhd saw a combined RM4.89bil erased from their market capitalisation at midday on Tuesday following the fallout from its US$1bil suit against Walt Disney Co and Twenty-First Century Fox Inc over the cancellation of the first Fox-branded theme park

At midday, Genting Malaysia had fallen 53 sen to RM3.07 with 186.18 million shares done.

This saw RM3.147bil erased from its market capitalisation based on the drop in share price by 53 sen and the paid-up of 5.938 billion shares. The market capitalisation was reduced to RM18.229bil.

Genting Bhd fell 45 sen to RM6.45 with 11.39 million shares done.

A total of RM1.74bil was wiped out from its market capitalisation. This was based on the drop in share price by 45 sen and the paid-up of 3.876 billion shares.

The selling was triggered by Genting Malaysia’s move to sue Walt Disney Co and Twenty-First Century Fox Inc for more than US$1 billion on Monday.

Genting Malaysia accused them of abandoning a contract related to its planned construction of the first Fox-branded theme park.

It said “seller’s remorse” induced Fox, with Disney’s help, to breach its 2013 contract with Fox Entertainment Group to licence intellectual property for Fox World, a proposed addition to its Resorts World Genting complex.

In a statement issued before market opened on Tuesday, Genting Malaysia denied that Fox had ground to terminate the memorandum of agreement dated June 1, 2013. The MoA was between it and Twentieth Century Fox Licensing & Merchandising, a division of Fox Entertainment Group, Inc.

To recap, Genting Malaysia was granted a licence to utilise certain intellectual property rights associated with Fox theatrical motion pictures in connection with the design, development, construction and operation of what was to be called the Twentieth Century Fox World theme park under the Genting Integrated Tourism Plan.

The MoA was subsequently amended on June 10, 2014 and June 9, 2017.

Genting Malaysia said in had on Monday filed legal proceedings in California against Fox Entertainment Group, LLC, Twentieth Century Fox Film Corporation, FoxNext, LLC, Twenty First Century Fox, Inc. (21CF) and The Walt Disney Company.

The suit was in response to a notice issued by FOX in which it terminated the MoA and claimed about US$46.2mil (or RM193.6mil) in accelerated payments.

“Genting Malaysia denies that FOX had grounds to terminate the MoA, denies any liability resulting therefrom, and has pursued cause of action against FOX for breach of contract, and breach of the implied covenant of good faith and fair dealing, among others. Genting Malaysia has also pursued cause of action against Disney and 21CF for inducing breach of contract and for interference with contract.

“Genting Malaysia intends to fully enforce its rights under the MoA, claim for the cost of its investments and consequential and punitive damages that in total will exceed US$1bil (or RM4.2bil) and such other reliefs to be determined by the court,” it said.

Genting Malaysia said the litigation was not expected to impact its current business operations.

Meanwhile, CIMB Equities Research said based on a news report, Genting Malaysia had already invested US$750mil in the theme park.

“This news is a major negative surprise to us. Genting Malaysia’s theme park was supposed to open in end-2017 but the date has been delayed to 1H2019. Due to potential legal complications, we are concerned if Genting Malaysia could still open the theme park in 1H2019.

“Due to the opening of the new theme park in 2019F, we had earlier forecast visitor arrivals to rise 14-15% in 2019/2020F. Now, it looks like our forecasts could be too optimistic.

“We are maintaining our EPS forecasts and our Hold call pending the conference call with management this Friday on its 3QFY18 results. A re-rating catalyst is the opening of the new theme park in mid-2019 while a de-rating catalyst is the theme park failing to open in 2019. Our target price remains pegged to its RNAV of RM4.85,” it said.

Source: TheStar