‘Buy’ GENM, Genting despite lower TPs


Analysts have a ‘Buy’ call on both Genting Malaysia Bhd (GENM) and Genting Bhd, but have cut both companies’ target prices (TPs).

Genting’s recent third quarter was heavily impacted by GENM’s RM1.8 billion impairment loss on investment.

Affin Hwang Investment Bank Bhd analyst Ng Chi Hoong in a report yesterday, upgraded GENM to ‘Buy’ from ‘Hold’ with a lower TP of RM3.80 from RM4.80 previously.

“We believe the share price correction is overdone, hence, we upgrade GENM,” he noted.

He added that Genting’s ‘Buy’ call is reaffirmed with a lower TP of RM10.90 from RM11.70.

“The share price correction is mainly related to its subsidiary, GENM. We are lowering our earnings per share for an estimated time of 2018 to 2020 by 1.7%-21.5% and our TP to RM10.90,” he said.

RHB Research Institute Sdn Bhd maintained its ‘Buy’ rating for GENM due to faith in its core business.

“We maintain ‘Buy’ with a new RM3.53 TP from RM4.30. While we assume the outdoor theme park will not open in the near term, we think GENM’s existing and upcoming facilities under the Genting Integrated Tourism Plan will continue to draw visitors,” RHB’s research head Alexander Chia wrote.

He added that this will contribute to higher gaming volume.

“With regard to the Mashpee promissory notes — the overhang has now been lifted, and investors can now refocus on the group’s core business operations and upcoming new facilities,” he said.

He also maintained ‘Buy’ rating for Genting, with a cut to its TP from RM11.50 to RM8.40.

“This pegged on a 30% holding company discount (from 20%) to take into account uncertainties and potential risks that could arise from its Malaysia subsidiary,” he said.

He added that Genting’s upcoming Resorts World Las Vegas, US, slated for 2020 completion, would offer investors direct casino presence.

“In Singapore, the reinvestment into Resorts World Sentosa and the potential to tap into Japan’s gaming industry are long-term rerating catalysts for the stock,” he said.

Public Investment Bank Bhd analyst Eltricia Foong noted the same, maintaining its ‘Outperform’ rating for Genting with a revised TP of RM8.80 from RM10.70.

“In the medium-to-long term, catalysts for Genting include Genting Singapore Ltd’s possible venture into the Japanese gaming market, expansion of Resorts World New York and the completion of an integrated resort in Las Vegas, which we have not factored into our forecasts. We maintain our ‘Outperform’
rating on Genting,” she said.

However, she maintained GENM’s rating as ‘Underperform’, it’s 12-month TP at RM2.70 while its current price is RM2.86.

“Given the risk of further delay to the opening of its outdoor theme park following its lawsuit against Walt Disney Co and 21st Century Fox Inc (Fox), we believe GENM’s growth trajectory will be affected by lower visitor arrival,” she said.

She also noted that despite the company’s positive performance at the core level, GENM’s share price will remain under pressure given the uncertainties surrounding its investment in the Fox-branded outdoor theme park.

“Thus far, management has not been forthcoming in providing clarity and we believe this would continue to be a drag to its share price performance,” she said.

Genting’s and GENM’s shares fell to an eight- and 10-year low respectively, due to investors’ concerns regarding the financial impact of Walt Disney and Fox’s decision of not to proceed with the theme park venture.

Walt Disney had also dismissed claims made by GENM accusing it of abandoning a licensing contract tied to the construction.

Genting closed 31 sen, or 4.9%, higher at RM6.59, while GENM closed 1.75% or five sen higher at RM2.91 yesterday.