Genting, GenM Skid to Four-year Lows as Investors Look Past Analysts' 'buy' Calls

KUALA LUMPUR (Dec 17): Investors appear to be ignoring analysts' strong “buy” calls on Genting Bhd (KL:GENTING), as the counter extended its slide to its lowest in over four years following a slew of bad news — from earnings misses to exclusion from the benchmark KLCI.

Genting shares traded down 1.11% or four sen to RM3.56 at the time of writing, around its weakest since late-2020 when the counter was dragged by closures during the pandemic. The counter is down 23% this year.

Genting Malaysia Bhd (KL:GENM) shares too traded two sen or 0.94% lower at RM2.10, also near its lowest since November 2020. Year-to-date, the stock is down 21.9%.

The gaming stocks were expected to stage a strong recovery at the beginning of 2024, owing to a rebound in travels and leisure activities. However, earnings misses prompted sharp cuts in forecasts and target prices (TPs) by analysts last month.

Even after that, the share prices for both Genting and Genting Malaysia have continued to decline further below the lower TP averages of RM5.07 and RM2.93, respectively. Genting Malaysia, too, bows out of KLCI this month.

Adding to the bad news in recent months are complaints against the group’s US subsidiaries, including a RM2.6 billion legal suit by Genting Malaysia’s joint venture partner RAV Bahamas Ltd over alleged fraud, which Genting Group has strongly refuted.

The Nevada Gaming Control Board in August also filed complaints against Resorts World Las Vegas over allegations that the latter did not ban individuals linked to organised crime from its casino.

The sell-off suggests that negative news flow in Genting Bhd has been priced in, said UOB Kay Hian, with improved earnings seen from its fourth quarter onwards.

UOB Kay Hian, in its response to The Edge, said that Genting’s earnings will improve from 4Q2024 onwards as its two main subsidiaries, Genting Malaysia and Genting Singapore Ltd, are “on course to restore their respective pre-pandemic earnings dynamics as hoped”.

“In our opinion, most negative news flow has been priced in at its current decade-low share price, and investors’ negative sentiment shall reverse as they re-divert focus towards Genting Malaysia’s consistent earnings delivery throughout 2025-2026,” said the research house, which revised its target price for Genting to RM5.14, from RM5.84, following the group’s latest quarter results in November.

For Genting, the Resorts World Las Vegas is expected to deliver “robust” performance in 4Q2024, anchored by convention events and Formula 1 Las Vegas, UOB Kay Hian said.

Over at Genting Malaysia, its US operations, particularly Resorts World NYC, as well as UK operations, have both trended higher from their earnings perspective versus 2019 levels, it said.

“Genting and Genting Malaysia also offer lush dividend yields of 5.4% and 9% for FY2025 based on our forecasts,” it added.

However, Rakuten Trade head of research Kenny Yee, when contacted, said investors could adopt a wait-and-see-approach for Genting even as its share price nears Covid-19 lows.

“The prospects of a weakening US dollar could represent added headwinds to the group,” Yee said, when contacted.

Another head of research with a local bank highlighted that fund flows could add to further downside for Genting, pointing to disposals by foreign investors amid US complaints and its KLCI exit, while larger local funds are unable to approach the stock due to Shariah compliance.

“In this situation, the stock can’t go up, not now,” the head of research said.

At the time of writing, Genting shares carried about a 4.9% yield based on the forward consensus dividend payout forecast compiled by Bloomberg. This is higher than the 4.5% average for the stock in the last five years.

From a forward price-to-earnings perspective, Genting shares last traded at 8.4 times forward PER, compared with its five-year average of 9.46 times, Bloomberg data showed.

Genting has 12 “buy” calls and two “hold” recommendations, with target prices ranging between RM4.10 and RM6.84 for an average of RM5.07. Genting Malaysia, on the other hand, has 13 “buy” calls and three “hold” recommendations, with TPs ranging from RM2.30 to RM3.65 for an average of RM2.93.

Source: TheEdge - 18 Dec 2024