PETALING JAYA: Genting Bhd
is at an inflection point, where a successful turnaround of Resorts World Las Vegas (RWLV) could serve as a significant catalyst for rerating.
According to Phillip Capital Research, the recent board refresh and resolution of legal headwinds appear to have laid the groundwork for the next phase of growth.
Recently, RWLV agreed to pay a US$10.5mil fine to settle allegations of non-compliance with federal anti-money laundering laws, with the settlement terms having been reviewed and approved by the Nevada Gaming Commission.
“We view this settlement as somewhat positive, as we believe it will help mitigate any further negative impact on Genting Malaysia Bhd’s bid for a downstate casino licence.
“As part of the remediation efforts, RWLV has undergone significant leadership changes in recent months, including the appointment of a new C-suite (line-up),” the research house said.
RWLV currently accounts for 6% of the group’s earnings before interest, tax, depreciation and amortisation (Ebitda), down from 10% in 2023.
“Management is sharpening its focus on driving profitability, with a renewed emphasis on cost discipline and targeted marketing.
“Although we have revised our RWLV Ebitda forecasts downwards for 2025 to 2027 by 14% to 21% to US$181mil/US$193mil/US$210mil, (respectively), these still represent a meaningful improvement over the US$107mil recorded in 2024,” Phillip Capital Research said.
It added that Genting continues to generate steady annual cash flows of RM7bil to RM8bil, and a potential turnaround at RWLV could alleviate valuation pressure.
The research house pointed out that Genting is trading at a 46% holding company discount, compared to an average discount of 40% over the past five years, further highlighting its appeal.
“Current valuation overlooks the upside potential from TauRx Pharmaceuticals Ltd, which remains underappreciated due to its complex timeline and mixed clinical results,” it added.
Genting has a 20.3% stake in TauRx, which is awaiting approval from the authorities for its treatment to combat Alzheimer’s disease.
According to the research house, TauRx is currently under regulatory review by the UK Medicines and Healthcare Products Regulatory Agency, which has requested further clarification.
“The following key milestone in April/May is expected to provide more clarity on the regulatory pathway.
“Based on our previous forecasts, TauRx’s revenue potential could range between US$480mil and US$3.6bil upon successful commercialisation, which would value Genting’s 20.3% equity stake in TauRx at RM1.06 to RM2.64 per share,” the research house said.
Phillip Capital Research lowered Genting’s earnings forecast for 2025 to 2027 by 19% to 23%, reflecting updated Genting Malaysia’s forecasts, lower RWLV contributions and higher interest expense.
“Overall, we project Genting’s core profit after tax and minority interests’ growth of 21%, 25% and 31% for 2025 to 2027, (respectively), albeit from a low base.
“We maintain our ‘buy’ rating with a lower sum-of-parts-derived target price of RM3.55 from RM4.15,” it added.
The research house said the group’s key earnings growth driver remains its gaming and leisure operations, with potential upside from TauRx.
However, key risks include weaker-than-expected earnings contributions from its subsidiaries, lower-than-expected win rates, rising operational costs and a decline in non-gaming revenue.
