Genting Berhad, a prominent player in Malaysia’s gaming industry, has attracted renewed attention from Maybank Investment Banking Group. Despite a lackluster performance in its share price attributed to external factors, the company holds significant potential for growth and valuation uptick, according to analysts.
Overview and Market Context
In a recent report, Maybank analyst Samuel Yin Shao Yang highlighted Genting Berhad’s underperformance in the market this year, primarily influenced by foreign investor concerns over the Malaysian ringgit’s volatility against the US dollar. However, Yang contends that these concerns are unfounded, especially in light of the recovery seen in Genting’s gaming operations post-COVID-19.
Operational Resilience and Growth Drivers
Genting Berhad operates major assets such as Resorts World Genting in Malaysia and Resorts World Sentosa in Singapore, both of which are nearing pre-pandemic operational levels. Yang identifies two significant catalysts poised to bolster Genting’s stock performance: potential inflation moderation in the US and a potential strengthening of the Malaysian ringgit against the US dollar, should the Federal Reserve opt for interest rate cuts.
Strategic Investments and Diversification Efforts
Beyond its core gaming portfolio, Genting Berhad has strategically diversified its investments. Recently, the company announced a substantial US$1 billion investment in its energy sector, aiming to reduce reliance on its leisure and hospitality segments. This move underscores Genting’s proactive approach to spreading risk and enhancing long-term sustainability.
Financial Performance and Sectoral Insights
Genting Berhad reported notable financial gains, including a 36% year-on-year increase in revenue from its leisure and hospitality segment, amounting to MYR6.48 billion (US$1.38 billion). Adjusted EBITDA also surged by 40% to MYR2.57 billion (US$547 million), demonstrating robust operational performance despite external economic challenges.
Innovative Ventures and Potential Upside
A particularly intriguing prospect for Genting Berhad is its ownership stake in TauRx, a company developing an experimental Alzheimer’s drug. Should TauRx achieve regulatory approval in the UK, its valuation could soar to US$15 billion, significantly impacting Genting Berhad’s overall valuation. Maybank projects a potential increase in Genting’s target price from MYR5.84 to MYR9.35 per share in anticipation of this development.
Global Presence and Market Strategy
Genting Berhad’s gaming operations span multiple geographies, including integrated resorts in Malaysia, Singapore, and Las Vegas, alongside casinos in prominent locations such as New York, the UK, and Egypt. This diversified global footprint positions the company favorably in capturing diverse market opportunities and mitigating regional economic fluctuations.
Genting Berhad stands at a pivotal juncture, poised to capitalize on strategic investments, operational resilience, and potential breakthroughs in pharmaceutical ventures. Despite current market challenges, the company’s proactive measures in diversification and strategic investments could pave the way for sustained growth and enhanced shareholder value in the foreseeable future.