Analysts at financial services group Nomura have raised their estimates for Genting Berhad and upgraded its rating to “Buy” due to significant market cap discounts.
In a Friday note titled “Buy for Genting Singapore, get Genting Malaysia for free”, analysts Tushar Mohata and Alpa Aggarwal observed that the Genting’s current market cap discounts all non-Singapore assets and has been trading below the value of its 52% stake in Genting Singapore.
“In effect, at current prices, the market seems to be completely discounting the value of all other businesses under Genting, including both the listed subsidiaries like its 49% stake in Genting Malaysia, 55% stake in Genting Plantations and all unlisted businesses like Resorts World Las Vegas, energy and utilities.
“We estimate these discounted, “free” businesses to contribute ~62% of Genting’s FY23F EBITDA.”
The analysts also observed that Genting is trading at a 66% discount to the value of listed subsidiaries and a 47% discount to the value of both listed and unlisted subsidiaries.
“As a result, we think that at current levels, the holding company’s RNAV (Revalued Net Asset Value) discount is unjustifiably wide, and we think this discount will narrow once macro risks ease, and further tourism recovery takes place in FY23F/24F.”
Upgrading Genting to “Buy”, Nomura said it has raised its revenue estimates for Genting Malaysia by 7% in 2023 and 2024, and its EBITDA estimates by 6% in 2023 and 8% in 2024. However, it has reduced its profit estimates by 22% in 2023 and 28% in 2024 due to higher depreciation and interest costs.
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