Genting Malaysia faces a double whammy financial estimates, and the target prices have all been cut
$GENM (4715.MY)$ Faced with the two major concerns that travelers who appreciated the ringgit were discouraged and that they might be kicked out of the composite index, Phillip Capital (Phillip Capital) decided to lower its profit forecast for the company and also slightly revise its target price, but it still maintained its “buy” rating.
Phillip Capital analysts pointed out that Genting Malaysia should be able to record a higher number of visitors in the 3rd quarter of this year, but the current trend of strengthening the ringgit may affect the number of foreign visitors in the future.
“Foreign tourists accounted for about 20% of the total number of visitors to Genting Plateau in the second quarter of this year, and the rapid rise in value of the ringgit over the past 3 months may affect foreign visitors to Malaysia.”
In any case, the analyst said that although the number of Chinese tourists was clearly lower than before the outbreak of the epidemic, the overall number of foreign visitors to Genting Plateau remained strong from July to August, reaching about 96% of the level before the outbreak of the epidemic.
“We are not changing the current expectations of visitors to Genting Plateau because we believe the recovery of the domestic tourism industry is still on track.”
Furthermore, according to the latest market capitalization performance, the analyst indicated that Genting Malaysia is likely to be kicked out of the list during the half-year review of the composite index constituent stocks in November of this year, and once this happens, the stock will not be able to rise in the short term. The reason is that funds linked to exchange indices need to readjust their investment portfolios.
Market capitalization fell to 36th place
“Genting Malaysia's market capitalization has fallen to 36th place in Malaysian stocks, and its constituent stock position is expected to be raised to 25th place $GAMUDA (5398.MY)$ Replaced.”
However, analysts also said that even if it falls out of the list of constituent stocks, Genting Malaysia is not expected to be significantly affected, because as of June of this year, Genting Malaysia's share ratio held by foreign investors is already the lowest in history at 15.1%.
After considering the stronger ringgit and increased interest expenses, the analyst lowered Genting Malaysia's net profit forecast for the 2024 fiscal year by 1%, while reducing the net profit forecast for the 2025-2026 fiscal year by 9%.
As a result, Genting Malaysia's target price was also reduced from the original RM3.40 to RM3.30.
Despite this, the analyst encouraged investors to take advantage of the low level to absorb Genting Malaysia and maintain the stock's “buy” rating.
“Genting Malaysia's current valuation is very cheap. The profit ratio (EV/EBITDA) of the estimated corporate value to interest, tax, depreciation and amortization (EV/EBITDA) in 2025 is as low as 6.6 times, and the expected weekly interest rate is as high as 7%.”
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📝 [Written by Reporter] Lin Dixuan
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Source: Nanyang Siang Pao
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