Affin IB Research maintains Buy on Genting, lowers target price

Affin IB Research maintains Buy on Genting, lowers target price
Business & Markets 2013
Written by theedgemalaysia.com
Friday, 30 August 2013 08:54

KUALA LUMPUR (Aug 30): Affin IB Research has maintained its Buy rating on GENTING BHD [] at RM9.20 with a lower target price of RM11.25 (from RM12) and said Genting’s 1HFY13 core net profit contracted 14% year-on-year (y-o-y) to RM837.5 million.

In a note Friday, the research house said annualised, the earnings were 22% and 24% below Affin and street estimates.

“As such, we trim Genting’s FY13-15 EPS by 5-13.6%. In tandem with the earnings downgrade, our target price for Genting is also lowered to RM11.25 (Genting Malaysia RM4.25 PT; Genting Singapore S$1.40 PT – from S$1.60 previously; Genting PLANTATION [] RM8.30 PT – from RM8.88 previously).

“Separately, Genting has proposed a: (1) 50 sen less 25% income tax special interim dividend; and (2) a non-renounceable restricted issue of 929.9m warrants on the basis of 1-for-4 shares held at RM1.50/warrant,” it said.

Affin Research said this equity call was expected to raise RM7.4 billion, assuming full conversion of the warrant to fund new investments, CAPEX of Las Vegas gaming outfit and paring down company debt.

“The deal is viewed positively – allowing shareholders to purchase underlying Gentin shares at a 13% discount to current market price. EPS dilution (25%) may be potentially offset by new earnings driver. Maintain Buy,” it said.