Genting’s share price has moved up by over 20% over the past two months.
We believe this is due to speculation on the potential listing of its
21%-owned pharmaceutical unit TauRx as well as the return of foreign
interest, given its high foreign shareholdings level of approximately
50%. At current levels, we believe upside is limited. Maintain NEUTRAL
with our TP revised to MYR9.08 (from MYR8.00, 2% downside).
TauRx a giant in the making? TauRx Pharmaceuticals (TauRx)
plans to present results from its third phase of human trials on its
experimental Alzheimer’s drug known as LMTX by Jul 2016.
According to preliminaryresearch results published in the Journal of
Alzheimer’s Disease, patients whotook its LMTX treatment had better
cognitive scores than those who did not receive it. Should the results
prove to be favourable, the Wall Street Journal reported that the group
would file for an IPO with an indicative market capitalisation of
USD15bn.
Impact on Genting. While we acknowledge that the
market potential for TauRx could be massive, with more than 40m
Alzheimer’s patients estimated worldwide, we highlight that there were
about 123 experimental Alzheimer’s medicines that had failed to commence
commercial production between 1998 and 2014. Based on our channel
checks, Genting has invested USD120m for its existing 21% stake in
TauRx. Should the IPO materialise, the value of Genting’s stake in TauRx
could blloon to over USD2.2bn (assuming its 21% stake would be diluted
to 15% post-IPO). This could potentially translate into value accretion
of MYR2.30-2.50 per share in Genting. We have yet to factor this into
our valuation, pending the confirmation of results from its latest
trials. Las Vegas to open in 2018. The proposed USD4bn Resorts World Las
Vegas (RWLV) recently received the green light from the Clark County
commissioners to proceed with construction. The site office and parking
garages are currently being constructed and would be completed by
mid-2016. Management highlighted that the public tender on the work
packages would soon be called, with physical construction works likely
to begin in 2H16. We reiterate our view that phase one of the project
would open earliest by mid-2018. Although nearterm earnings-accretion is
unlikely, RWLV could, in the long run, help to address investors’
perception of the group being a holding company.
Maintain NEUTRAL. We raise our TP to MYR9.08 (from
MYR8.00), factoring in our latest valuation on its listed subsidiaries
and pegging a revised discount of 15% (from 25%). This is to reflect
improved market sentiment amidst te return of foreign institutions (as
evidenced by YTD net inflows of MYR1.6bn by foreignthe limited downside,
we maintain our NEUTRAL call. The upside risk to our call would be
clinical results of LMTX proving favourable, while key downside risks
include further delays for RWLV and unsuccessful clinical trials.
GENTING (3182) - Genting - A Closer Look At TauRx
http://klse.i3investor.com/blogs/rhb/93873.jsp
