KUALA LUMPUR: Multiple interests pose multiple risks for the Genting group which is involved in gaming, plantations, property, power and oil and gas, Maybank Investment Research says.
In its research note issued on Monday, it said while environmental issues are unlikely to weigh on earnings, Genting is addressing its environmental issues.
“We are more concerned for governance and social issues. Genting has a history of related party transactions (RPT), ” it said.
Maybank Research said Genting Singapore operates in a highly regulated environment which is getting stricter. It is unsure if Resorts World Las Vegas (RWLV) will be profitable going forward.
“Maintain estimates but trim target price by 10% to RM3.26 as we now ascribe 55% discount to sum-of-parts a share (50% previously), ” it said.
The research house said Genting’s profitability is unlikely to be materially challenged by environmental issues. Its plantations arm, Genting Plantations (TP: RM8.60) and power arm, Genting Energy (Not Listed) typically account for 10-20% of group earnings.
Yet, both are addressing environmental issues via certifications and technology.
Maybank Research said Genting Malaysia (Buy, current price: RM2.10, TP: RM2.74) and
Genting Singapore (Hold, CP: 69.5 Singapore cents, TP: 76 cents) typically accounts for 80%-90% of group earnings.
As for Genting Malaysia, it has a history of RPTs. The latest is the acquisition of 49% of Empire Resorts from Genting’s controlling shareholder, the Lim family.
“We forecast Empire Resorts to contribute more than RM100mil in losses per annum, ” it said.
As for Genting Singapore, it has strong social credentials. That said, the 50% hike in casino entry levies for Singaporean citizens and permanent residents (SCPR) on April 4,2019 eroded its gamblers base.
“Notwithstanding, we note that Genting has been more progressive with dividends despite the downtrend in EPS since FY18. Curiously, Genting is effectively raising its DPR while building the US$4.3bil RWLV which we have reservations about given that the Covid-19 pandemic is raging in the United States.
“That said, Genting is also an active investor in life sciences (TauRx, Cortechs Labs, DNAe, Celularity). We view these investments as ‘call options’ that could pay off handsomely, ” it said.
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