Genting Bhd
March 21 (RM9.50)
Maintain hold with a higher target price (TP) of RM8.05: We observed recently that there had been strong buying interest in Genting Bhd, despite no apparent rerating catalysts from its major subsidiaries, Genting Malaysia Bhd, Genting Singapore plc and Genting Plantations Bhd. We believe that the buying interest probably stemmed from its 20.7% investment in TauRx Pharmaceuticals Ltd, a Singapore-based developer of novel treatments and diagnostics for Alzheimer’s disease.
Successful clinical tests of Alzheimer drugs could lead to an eventual listing. According to Bloomberg Business, TauRX plans to submit results of ongoing final human trials using its experimental Alzheimer’s drug, LMTX, as early as July.
Earlier studies showed some positive signs for LMTX in treating Alzheimer’s disease. A successful clinical test could lead to an eventual listing of TauRX next year, which some media have speculated could fetch a market valuation of about US$15 billion.
We understand that Genting has so far invested about US$120 million (RM487.2 million) in this venture. At present, we have not ascribed any value to Genting’s 20.7% stake in TauRX in our valuation model, as it serves as a binary event. The successful listing of TauRX with a valuation of US$15 billion could increase Genting’s revised net asset value from RM9.40 a share to RM12.37 per share. Nonetheless, prolonged unsuccessful drug trials could significantly lower the market value of TauRX.
We maintain our “hold” recommendation on the group, with a higher TP of RM8.05 (from RM7.45). We lower the holding company’s discount to 15% (from 20%), as we believe that the investment environment has become conducive for asset-reflation plays, compared with a couple of months ago. Furthermore, potential successful clinical trials of LMTX could provide an upside risk to our recommendation and TP. Key risks to our view are regulatory risks and negative surprises from its key subsidiaries. — AllianceDBS Research, March 21
GENTING (3182) - Genting betting on TauRX
http://www.theedgemarkets.com/my/article/genting-betting-taurx
