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KUALA LUMPUR: Multiple interests pose multiple risks to the Genting group that is involved in gaming, plantations, property, energy, and oil and gas, says Maybank Investment Research.
In its investigative note issued Monday, it said that while environmental issues are unlikely to weigh on profits, Genting is addressing its environmental issues.
“We are more concerned with governance and social issues. Genting has a history of related party transactions (RPT), ”he said.
Maybank Research said that Genting Singapore operates in a highly regulated environment that is becoming more stringent. He is not sure if Resorts World Las Vegas (RWLV) will be profitable in the future.
“Maintaining the estimates but cutting the target price by 10% to RM3.26, as we now assign a 55% discount to the sum of parts per share (50% previously),” he said.
The research house said Genting’s profitability is unlikely to be materially questioned on environmental grounds. Its plantations arm, Genting Plantations (TP: RM8.60) and its energy arm, Genting Energy (not listed) generally account for 10-20% of the group’s profits.
However, both are addressing environmental issues through certifications and technology.
Maybank Research said that Genting Malaysia (Buy, current price: RM2.10, TP: RM2.74) and
Genting Singapore (Hold, CP: 69.5 Singapore cents, TP: 76 cents) generally accounts for 80% -90% of the group’s profit.
As for Genting Malaysia, it has a history of RPT. The latest is the acquisition of 49% of Empire Resorts from Genting’s controlling shareholder, the Lim family.
“We anticipate that Empire Resorts will contribute more than RM100,000 in losses per year,” he said.
As for Genting Singapore, it has strong social credentials. That said, the 50% increase in Singapore Citizen and Permanent Resident (SCPR) casino entrance taxes on April 4, 2019 eroded its player base.
“Nonetheless, we note that Genting has been more progressive with dividends despite the downward trend in earnings per share since fiscal 2018. Interestingly, Genting is effectively increasing its DPR while building the RWLV of $ 4, 3 billion on which we have reserves given that the Covid-19 pandemic is sweeping the United States.
“That being said, Genting is also an active investor in life sciences (TauRx, Cortechs Labs, DNAe, Celularity). We see these investments as ‘call options’ that could pay off, ”he said.
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