Genting Berhad, a global gaming powerhouse, has recently announced significant investments in its oil and gas as well as energy segments. These ventures, totaling over US$1 billion, are poised to reshape its portfolio and expand its footprint across China and Indonesia. This strategic move underscores Genting’s commitment to diversifying its revenue streams beyond its core gaming business.
Floating LNG Facility in Indonesia
Genting Berhad has entered into a substantial US$963 million Engineering, Procurement, Construction, Installation, and Commissioning (EPCIC) contract with Wison New Energies Co., Ltd. This agreement focuses on the construction of a Floating Liquefied Natural Gas (FLNG) facility. Scheduled for completion by the second quarter of 2026, the facility will be stationed in West Papua, Indonesia. It will source feed gas from the Kasuri Block concession area, owned 95% by Genting Oil Kasuri Pte. Ltd. The funding for this project will be drawn from internally generated funds and project financing, with significant support from Chinese and international lenders.
Gas Power Generation in China
In a parallel move, Genting Berhad has finalized a share subscription agreement with Jineng International Energy Co., Ltd. and a Heads of Agreement with SDIC Power Holdings Co., Ltd. This agreement entails the acquisition of a 49% equity stake in SDIC Jineng (ZhouShan) Gas Power Generation Co., Ltd. for US$14 million, with an additional US$46 million investment earmarked for achieving commercial operations by 2025. SDIC Jineng is pivotal in developing a gas-fired power plant in ZhouShan, located in the Greater Shanghai Area of Zhejiang Province, China. This project is expected to enhance power generation capabilities, specifically through the deployment of an innovative H class unit, a first for Zhejiang Province. Commercial operations are slated to commence in the fourth quarter of 2024, with a focus on supporting the energy needs of the region.
Financial and Strategic Implications
Despite the significant capital allocation to these ventures, Genting’s gaming segment remains the primary revenue driver, contributing a substantial majority to its overall revenue. Analysts from Nomura suggest that while the power, oil, and gas divisions accounted for only 6% of the group-wide revenue in 2023, the strategic diversification could yield positive long-term benefits. They maintain a bullish outlook on Genting Berhad’s stock, highlighting an attractive valuation compared to its listed subsidiaries.
Market Perspectives and Analyst Insights
Nomura analysts Tushar Mohata and Alpa Aggarwal emphasize that Genting Berhad’s current share price reflects a considerable discount relative to the valuation of its subsidiaries. They attribute this to the market undervaluing the holding company’s diversified portfolio and anticipate a potential narrowing of this discount in the future. The analysts further note that the recovery trajectory of Genting’s net income post-pandemic, particularly bolstered by the resurgence of its Resorts World Las Vegas (RWLV) earnings and the operational revitalization of its power division, underscores the company’s resilience and growth potential.
Genting Berhad’s recent strategic investments in the energy and oil & gas sectors mark a decisive step towards enhancing its market position and diversifying its revenue streams. With substantial investments planned in both Indonesia and China, the company is poised to capitalize on growth opportunities in the energy sector while leveraging its operational expertise and financial resources. This strategic pivot, while maintaining a focus on its core gaming business, positions Genting Berhad favorably for sustained growth and value creation in the global market landscape.