Brexit vote sends Genting Malaysia’s shares crashing

TAGs: Brexit, Genting, Genting Malaysia, Jasmine Solana, Nomura

United Kingdom’s decision to leave the European Union has far-reaching ramifications. Literally.

Brexit vote sends Genting Malaysia’s shares crashingGenting Malaysia Bhd, one of the handful of Asian companies with the most UK exposure, saw its shares drop by 4.4 percent since the June 23 referendum as investors find the company’s foray into the European country’s gaming market too much of a gamble.

Genting Malaysia, which operates 43 casinos in the UK, is among the 10 Asia-Pacific companies “most at risk to Britain’s economic slowdown,” according to Bloomberg data.

Analysts at Nomura Holdings Inc. forecast a drop of 1 percent in earnings per share for Genting Malaysia “for every 10 percent slide in the pound-ringgit rate” this year.

Genting Malaysia made its UK debut in 2010 after purchasing 46 casinos—including Crockfords, Colony Club, Maxims, and London Mint brands—from its sister company, Genting Singapore Plc.

The Brexit vote will prove to be another blow to Genting Malaysia’s parent company, Genting Bhd, which is still reeling from the effects of new taxes and lower VIP spending in Malaysia.

In the first quarter of 2016, Genting Bhd recorded a 79 percent drop in year-on-year profit, from RM620.1 million ($152 million) to RM130.8 million ($31.9 million). Genting attributed its revenue slump to foreign exchange losses due to the strengthening Malaysian ringgit as well as the recently introduced goods and services tax and the lack of one-off gains that had boosted its performance in 2015.

The casino group said its UK business posted RM173.2 million ($42.46 million) profit from its premium players in the first quarter of the year, when the foreign exchange movement of the British pound against the Malaysian ringgit had been favorable.

Now, Nomura analysts are warning of “slower business volumes” due to the Brexit vote.

“We see a dual negative impact from the results of the Brexit vote,” Nomura said in a report, according to the news outlet. “A weaker economic climate will likely result in slower business volumes and will be further hurt by a weaker pound to ringgit translation.”


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