"Genting share price recovery expected to track ringgit recovery"

KUALA LUMPUR: Maybank Investment Bank (Maybank IB) Research has maintained a BUY call on Genting Bhd despite cutting both its target price and earnings per share (EPS) estimates, favouring it as a post-COVID recovery play with expectations that a recovery in the ringgit will prompt a share price recovery.

EPS estimates have been trimmed by 4-24 per cent and sum-of-parts (SOP) target price to RM5.36 from RM5.61, on slower-than-expected recovery at Genting Malaysia Bhd and Genting Singapore Limited.

Maybank IB Research said there is a strong correlation between the Ringgit/USD and Genting's premium/(discount) to SOP/share because of its high foreign shareholding.

"We notice that foreigners tend to BUY/SELL Genting when the ringgit appreciates/depreciates," it said in a note.

In its view, it is business as usual for Resorts World Genting but Genting Singapore's Resorts World Sentosa (RWS) operates in the most highly regulated casino jurisdiction in the world which puts it at a disadvantage vis-à-vis its regional competitors.

On Genting Plantation, Maybank IB Research expects the company to redirect its efforts to raising palm oil yields rather than growing its land bank due to anti-palm oil campaigns.

It said itwill also need to focus on achieving group-wide Roundtable on Sustainable Palm Oil (RSPO) certification.

On Genting Energy, the research firm believes its net capacity will likely continue to be fossil fuel-focused due to the abundance of coal in Indonesia.

That said, Genting Plantation and Genting Energy are addressing environmental issues via certifications and technology.

Main risks to Genting's profitability and ESG credentials continues to be the recurrence of related party transactions by Genting Malaysia, with the latest being the acquisition of 49 per cent of loss generating Empire Resorts and increasingly stricter regulations being imposed on RWS.

Genting scores slightly above-average in Maybank IB Research's proprietary scoring methodology for ESG with an overall score of 59/100 (46 previously) based on our review on its FY22 (FY21 previously) sustainability efforts and achievements.

Maybank IB Research believes Genting's active investments in life sciences through Genting TauRx Diagnostics Centre Sdn Bhd, TauRx Pharmaceuticals Ltd,  DNAe Group Holdings Limited, Celularity Inc., could also pay off handsomely one day.

Genting's share price was up three sen to RM4.23 a share, as at 10.47am.

 

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