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Valuations Compelling, Moderate Positives Expected For Genting
Genting’s stock closed at RM8.25 on 5 June 2015, representing a 19 percent fall from its one-year high of RM10.22, while its warrants issued in 13 December 2014 (with an exercise price of RM7.96) closed at RM1.43, below its issue price of RM1.50.
UOB Kay Hian Research noted that current valuation of the firm’s stock seems compelling, as it continues to expect moderate positives to re-rate the stock, including modest special dividends in this year’s 50th anniversary celebration and the opening of an iconic 20th century theme park by 49.3 percent-owned Genting Malaysia in 4Q16.
The research house added that Genting’s present valuation did not ascribe any option value to the eventual opening of Genting Las Vegas or casino liberalisation in Japan (subsidiary Genting Singapore was regarded as a key contender for a casino concession in Japan).
Significance: According to UOB Kay Hian, Genting is trading at a prospective 2015 enterprise value to earnings before interest, tax, depreciation and amortisation (EV/EBITDA) of 7.4 times, the low end of its 7 to 24 EV/EBITDA range at a 9.4 average. It has a ‘Buy’ call on the stock, with unchanged sum of the parts-basedtarget price of RM10.90 , which implies a 9 times 2015 forecast EV/EBITDA.
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