CIMB Research lowers Genting target price

KUALA LUMPUR: CIMB Research has lowered its target price for Genting Bhd after a disappointing set of financial results by the diversified conglomerate.

The local brokerage’s new price target for Genting is now pegged at RM7.20, down from RM8.70, with a “hold” recommendation on the counter.

In its research note on Thursday, CIMB Research explained that the new target price for Genting followed its recent target-price revisions for Genting Singapore PLC (GenS) and Genting Plantations Bhd (GenP), and based on a wider holding company discount of 30%, compared with 20% previously, to the estimated revalued net asset value (RNAV). 

The lower price target for Genting was also to account for the bleak outlook for GenS and GenP and a slight delay in the 20th Century Fox theme park launch, it said. 

“In the near-term, we expect Genting’s share price to continue tracking the performance of GenS; however, this should change as Genting Malaysia Bhd (GenM) rises in earnings prominence,” CIMB Research said.

It noted that Genting’s core net profit of RM67.9mil for the second quarter ended June 30, 2015, was 41% below its full-year forecast. The brokerage pointed out that contrary to our expectations, Genting did not declare an interim dividend. 

“As intimated in our last quarter’s results note, GenS and GenP were expected to disappoint and they have done so. 

“We cut our 2015-2017 earnings by 20%-29%, following further cuts in GenS’ earnings by 17%-21%, GenP by 12%-36% and GenM by 1%-10%,” CIMB Research said.

According to the brokerage, at present, there was still no clarity Genting’s Resorts World Las Vegas project in the United States.

“During the conference call, Chong Kin Leong, Genting’s executive director of finance, revealed that the cost and project details for Resorts World Las Vegas have still not been finalised. 

“Genting expects to complete the capital expenditure (capex) budget by year-end. Also, it expects the construction to begin in mid-2016, with the new casino to be opened by mid-2018. We have not imputed any capex or RNAV surplus in our valuation,” CIMB Research said.