KUALA LUMPUR: There are several developments in the US which Affin Hwang Capital believes could possibly end up favourably and improve investor sentiment on Genting Malaysia Bhd.
Affin Hwang said there could be a potential reversal of the RM1.8 billion write-off by Genting in its third quarter 2018 results.
The write-off was related to the group’s investment in the notes issued by the Mashpee Wampanoag tribe.
The firm explained that the US court had ruled that the tribe did not meet the requirement stated in the 1934 Indian Reorganisation Act, which limits the US Interior Department on holding the land in trust for the tribe.
The tribe had previously planned to build a casino on the contested land. However, the House Committee on Natural Resources is now chairing a legislative hearing on a bill that could reverse the court decision.
“In case of a favourable outcome, Genting Malaysia could post net gains of more than RM1.8 billion. However, as these issues involve state and federal politics in the US, the outcome is hard to predict,” Affin Hwang said.
The firm reiterated its “buy” call on Genting Malaysia with an unchanged target price of RM 3.80.
Affin Hwang said the developments in US would help to improve investor sentiment on Genting Malaysia as its stock price has been impacted by negative news flow such as the cancelation of the 20th Fox Theme Park.
The firm believes that there could be new opportunities in New York and Florida for Genting Malaysia to participate. This included the group’s Resort World Casino New York which could play a role in the US$10 billion sports betting market.
In Florida, the firm noted that the state was negotiating with the Seminole Tribe on their “exclusive” rights to offer banked card games in the state, which contributed US$350 million annually to the state.
“The state could expand gaming if the negotiation falls through to fill the budget gap, potentially benefiting Genting, in our view,” it added.