CGS International (CGS) said today (May 27), they reiterate their Add rating on Genting Bhd (GENT) with a higher TP of RM7.20, based on an unchanged 30% holding company holding company discount to SOP.
CGS has also raised their FY24F and FY25F EPS by 14.9% and 31.0%, respectively, to factor in a higher adjusted EBITDA forecasts for Genting Singapore (GENS) and Genting Plantations (GENP).
CGS said GENT remains a credible proxy for the recovery in tourist arrivals into Malaysia and Singapore, as 37% and 41% of its FY24F EBITDA are from Genting Malaysia (GENM) and GENS, respectively. To illustrate the undervaluation of GENT, its 53% stake in GENS is currently valued at 9% above its current market value; GENT remains a FBM KLCI laggard, which is poised to play catch-up.
GENM should see strong 1Q24F from higher tourist arrivals
CGS expects GENM’s Malaysian operations to post qoq and yoy improvements in 1Q24F revenue and EBITDA, following tourism data indicating that total tourist arrivals in Malaysia in 1Q24 rose 35% yoy and 2% qoq to 5.8m. And, they believe increased tourist arrivals would have helped drive business volumes at its gaming and non-gaming operations in Resorts World Genting (RWG), likely contributing to GENM’s revenue growth in 1Q24F.
GENS’s strong 1Q24 with expectations of 20% IVA growth in 2Q24F
GENS’s 1Q24 adjusted EBITDA of S$369.5m (+92.7% yoy) was driven by strong revenue growth of both its gaming (+69.5% yoy) and non-gaming segments (+44.2% yoy).
However, this is expected to normalise in 2Q24F as the increased visitors and tourism spending likely peaked in 1Q24. Singapore saw an increase in international visitor arrivals (IVAs) by 49.6% yoy in 1Q24, with YTD IVAs recovering to 92.9% of 2019 levels.
CGS believes IVAs is likely to experience robust yoy growth of c.20% in 2Q24F.
TauRx gaining traction; key is FDA approval
A key catalyst for GENT will be its Alzheimer’s disease oral drug TauRx receiving FDA approval. The 24-month data in Mar 24 looked promising, with sustained benefits across the disease spectrum from early to moderate dementia and significantly reduced disease progression in participants in the Phase 3 LUCIDITY trial.
TauRx has announced that it has initiated regulatory engagement discussions in both the UK and the US. While they have not accounted for any value from TauRx, CGS’s back-of-the-envelope calculations suggests this could add another RM0.70/share based on a potential market of RM536bn, 5% market share and a 10% net margin.
