KUALA LUMPUR (Feb 28): Genting Malaysia Bhd’s (KL:GENM) stock fell to its lowest in more than four years amid investors’ worries over future dividends after the latest results came in sharply below market expectations.
Analysts are increasingly cautious and slashed their earnings for Genting Malaysia after the company’s 2024 net income accounted for less than half of the consensus estimate for 2024. At least five downgraded their recommendations for the stock.
“Going forward, we expect continued operating challenges from the group’s UK and US business segments, as well as Empire Resorts,” said Hong Leong Investment Bank in downgrading the stock to ‘sell’ from ‘buy’.
Shares of Genting Malaysia fell as much as 16% or 38 sen to RM1.98, their lowest since January 2021. Investors also sold down parent company Genting Bhd (KL:GENTING), pushing its shares down to RM3.33, a level not seen since November 2020.
Genting Malaysia now has six ‘hold’ and three ‘sell’ calls, outnumbering the eight ‘buy’ recommendations. The average 12-month target price has fallen to RM2.64 from RM2.93 on Monday, according to Bloomberg.
Genting Malaysia declared a lower dividend for 2024 as part of its strategy to conserve cash for expansion and investment, according to several analysts who attended a post-earnings briefing with the company’s management.
Genting Malaysia’s resorts in New York City would need an estimated US$5 billion (RM22.32 billion) for expansion if its bid for a downstate casino licence is successful, while the company may require another capital outlay of US$3 billion if it manages to secure a licence in Thailand.
“We understand that dividends were cut to prepare to expand but fear that investors will not take it kindly,” said Maybank Investment Bank, which downgraded the stock to ‘hold’ from ‘buy’.
In contrast, analysts shrugged off the weak results of its parent company Genting, who mostly told investors to focus on rising tourist arrivals that will lift visitations to its resorts and casinos elsewhere.
A majority of 12 out of 15 analysts kept their ‘buy’ calls on Genting while three have ‘hold’ calls, with average target price of RM4.91, according to analysts tracked by Bloomberg.
“We still see it as a credible proxy for tourist arrivals into Malaysia and Singapore,” said CGS International, which reiterated its ‘add’ call on Genting.
The stock’s valuations are also still “attractive”, trading at just eight times its forward earnings compared to its regional average of 13 times, the research house noted.
For Public Investment Bank, Genting is still on ‘outperform’ recommendation as “we expect the overall recovery momentum for regional gaming market to continue into 2025”.