Philip Capital Research said it expected Genting Malaysia to register earnings growth of 18%.
PETALING JAYA: The earnings recovery momentum of Malaysian gaming stocks will be the focus of investors going into 2025, supported by the anticipated rebound in Chinese tourists together with the award of full casino licenses in the United States and Thailand.
Philip Capital Research has maintained an “overweight” call on gaming stocks, with the key catalyst for the re-rating of these stocks to be the robust recovery of earnings driven by a rebound in foreign visitors.
The research house also expects the successful commercialisation of TauRx, a dementia drug being developed by TauRx Pharmaceuticals Ltd, in which Genting Bhd
has a 20% stake, to be a key factor to potentially value Genting’s stock at between RM1.06 and RM2.64 per share.
It also noted that Genting Malaysia Bhd, the operator of the Resorts World brand of integrated casinos and resorts, would see an incremental earnings before interest, tax and depreciation (Ebitda) contribution of RM250mil to RM320mil in 2026, should it secure a casino licence in New York.
This would potentially raise the stock’s valuation by an additional 30 sen to 40 sen per share, based on seven times enterprise value to Ebitda.
“We recommend that investors position ahead of these potential surprises,” the research house said, recommending a “buy” rating on Genting with a target price of RM4.75 and Genting Malaysia at RM3.30.
“We like Genting for its multipronged growth potential and attractive valuation, trading at 5.5 times enterprise value to ebitda and Genting Malaysia for its high liquidity and a strong dividend yield of 8%.
“Key downside risks to our ‘overweight’ call include lower-than-expected gaming volumes and win rates, an increase in gaming taxes and value-destructive related-party transactions,” the research house said.
Philip Capital Research said it expected Genting to register earnings growth of 24% and Genting Malaysia to register earnings growth of 18% driving 21% earnings growth in 2025, backed by increasing gaming volumes and higher non-gaming spending, supported by a steady rise in foreign and local visits.
“Despite the strong momentum, Genting and Genting Malaysia’s 2025 earnings are anticipated to remain 27% and 33%, respectively, which is below pre-Covid-19 levels due to higher interest costs, wider losses from Empire Resorts (via Genting Malaysia), and higher effective tax rates.
“It is worth highlighting that both companies have surpassed pre-Covid-19 Ebitda levels, signifying the strength of their underlying operations,” it said.
