TauRx boost for Genting

Likely catalyst: People pass a Genting signage at a hotel in Singapore. The potential listing of Genting’s 20.7-owned TauRx on Nasdaq may provide a catalyst to Genting’s share price. – Reuters

Casino operator may gain from share in drug company

PETALING JAYA: The potential listing of Genting Bhd’s 20.7%-owned Alzheimer’s drugs company on Nasdaq could provide a catalyst to the share price of the Malaysian conglomerate.

At a valuation of US$15bil (RM65.9bil), the initial public offering (IPO) of Singapore-based TauRx Pharmaceuticals Ltd could potentially add RM10.4bil, or 40%, to the sum-of-parts (SOP) for Genting based on Maybank Investment Bank (IB) Research analysis.

“This implies a 40% upside from this one listing alone,” Maybank IB Research said in its report.

“If TauRx is valued at RM15bil, our SOP-target price surges to RM11.35, implying a whopping 60% upside,” the brokerage explained.

Citing Genting as one of its top “buy” picks, Maybank IB Research pointed out that even without the listing of TauRx, its target price of RM9.05 for Genting would already imply a 27% upside.

Genting shares rose 30 sen to close at RM7.40 yesterday.

The Wall Street Journal reported last week that the owners of TauRx were looking at a potential listing of the company on the Nasdaq Stock Market in the United States by 2017. Quoting unnamed sources familiar with the matter, the report said the deal could value TauRx at US$15bil.

According to WSJ, TauRx has already started inviting banks to pitch for a mandate to advise it on a potential IPO after results come in from late-stage clinical drug trials, likely in the middle of this year.

The report quoted a spokesperson for TauRx as having conceded that the company was indeed holding exploratory discussions with a number of investment banks, with the primary focus on identifying the available options for the group. An IPO in 2017 was a possibility, the spokesperson was quoted as saying, but no decision would be made until the results of TauRx’s Alzheimer’s drug trials were available.

Genting is the largest shareholder in TauRx, having committed an investment of US$120mil in the company that was co-founded in 2002 by Prof Claude Wischik of the University of Aberdeen and Singaporean gynaecologist, surgeon and venture capitalist Dr K.M. Seng.

To date, the company has managed to raise a total of US$350mil from various investors, including Genting and Singapore investment arm Temasek Holdings and multinational banking and financial services DBS Bank Ltd as well as Canadian holding company Dundee Corp.

“TauRx supports our view that Genting remains deep in value,” Maybank Research said.

The brokerage noted that the largest-listed Alzheimer’s drug-centric company to date was Axovant Sciences with a market capitalisation of US$1.6bil. It added that older Alzheimer’s drugs by larger pharmaceutical companies such as Aricept, Exelon, Radzadyne, Namenda and generic variations could generate annual sales of at least US$6bil.

For the nine months ended Sept 30, 2015, Genting saw its net profit fall 14.2% to RM1.05bil, or 28.22 sen per share, from RM1.22bil, or 32.91 sen per share, in the corresponding period last year.

The lower earnings were mainly attributable to higher net fair value loss on derivative financial instruments, impairment losses and deferred expenses written off in respect of the Bimini operations, which were partially offset by gain on disposal of available-for-sale financial assets, gain on deemed dilution of shareholding in associate and reversal of previously recognised impairment losses.

During the nine months in review, Genting saw its revenue fell 3.02% to RM13.18bil from RM13.59bil previously.