KUALA LUMPUR (July 15): Maybank Investment Bank (IB) said it's the “last calls for bets” in a note on Monday for Genting Bhd (KL:GENTING), whose sum-of-parts (SOP)-based target price (TP) may be raised to RM9.35, if its 20%-owned TauRx Pharmaceuticals ends up getting valued at US$15 billion (RM70.11 billion).
The research house maintained its 'buy' rating for Genting, with an unchanged TP of RM5.84, despite the group's 'lacklustre' share price. At the time of writing on Monday, Genting shares had fallen two sen or 0.4% to RM4.56, valuing the group at RM17.7 billion.
Despite Maybank IB’s longrunning optimism, investors remained cautious on the prospects of TauRx especially after US Food and Drug Administration (FDA) in March delayed its decision on Eli Lilly’s Alzheimer’s drug experimental treatment for early Alzheimer's disease. The delay by the FDA was the second after the regulator declined to grant accelerated approval for the medicine a year ago.
Requests for "Fast Track" designation are made by drug companies, and the US FDA will review and decide on the request "based on whether the drug fills an unmet medical need in a serious condition", according to the regulator's website.
Genting's share price has eased 2% year-to-date, while the FBM KLCI has appreciated 11%.
Maybank believes this is unfounded, considering that Genting’s earnings have been recovering well to near pre-Covid levels, driven by the return of visitors to both 49%-owned Resorts World Genting and 53%-owned Resorts World Sentosa.
The house said Genting's share price weakness was the result of foreign selling, due to a weaker ringgit against the US dollar. It opined that the foreign selling is likely to taper.
“We notice that there is a strong correlation between Genting's discount to SOP/share and the MYR/USD.
“Our foreign exchange research team forecasts the USD/MYR to recover to 4.600 by end-2024, and 4.500 by mid-2025, from 4.718 as at June 30.
“We expect this to narrow Genting's valuation discount to SOP/share to 60% (as per the level in the financial year ended Dec 31, 2022), from 65% currently,” the house added.
On July 1, TauRx announced its submission of the UK marketing authorisation application for an experimental drug, hydromethylthionine mesylate (HMTM), for the treatment of mild cognitive impairment and mild to moderate stages of Alzheimer’s.
If HMTM is approved by year end, the research house expects the pharmaceutical company to be valued up to US$15 billion, achieving Maybank’s forecast TP for Genting.