GOING forward, Hong Leong Investment Bank (HLIB) anticipates continued earnings recovery for GenS and GenM, and thus benefiting GenT, driven primarily by the improving tourist numbers.
The recovery will be supported by the rebound in travel demand from major source markets across the Asia-Pacific region, especially mainland China supported by the 30 days visa-free travel agreements between China and both Malaysia and Singapore.
Meanwhile, Malaysia’s recovery will be further fuelled by its official assumption of the ASEAN Chairmanship in 2025.
During this period, Malaysia will host key ASEAN meetings with delegations from prominent nations, including the US, China, South Korea, Japan, Europe, India, Australia, and New Zealand. This momentum will continue into Visit Malaysia Year 2026.
A notable development to monitor in 2025 could be the bidding for the full casino license in downtown New York City by Resorts World New York City (RWNYC).
Currently, RWNYC is a casino operating with slot-like video lottery terminals (VLTs) and electronic table games. For RWNYC to operate with Las Vegas-style slot machines, table games, and sports betting, the casino must win one of the three full-scale downstate casino concessions.
A successful bid would result in a major expansion and renovation of the casino, with an investment of USD5bil.
The request for applications (RFA) process is expected to open in mid-2025, with licenses awarded by the New York Gaming Facility Board in late-2025.
However, the ongoing complaint by the Nevada Gaming Control Board (NGCB) against its parent company, GenT, and the lawsuit by RAV Bahamas against GenM’s US unit could pose challenges to RWNYC’s chances of securing a full casino license.
Another key event to monitor this year will be the participation of GenM in the bidding for the Thailand Entertainment Complex.
On 13 Jan 2025, Thailand’s Cabinet approved a draft law, the “Entertainment Complex Business Act”, which seeks to legalise gambling and casinos.
According to news reports, Thailand could launch its first casino as early as 2029. During GenM’s AGM in Jun 2024, the group expressed interest in pursuing the Thailand’s Entertainment Complex project if the terms and conditions are favourable, as part of its geographical expansion strategy.
“As now, we have not factored in these two potential developments in our GenM’s and GenT’s Target Prices (TP), due to their preliminary nature and lack of detailed information,” said HLIB.
As for TauRx Pharmaceuticals, the pharmaceutical company has achieved success in its 3rd clinical trial for the drug hydromethylthionine mesylate (HMTM).
Based on the Wall Street Journal report published in 2015, TauRx could be valued at USD15bil if it is listed on the Nasdaq following the successful completion of its 3rd clinical trial.
It is important to note that the “drugs that slows Alzheimer’s disease progression” market was devoid of competitors back in 2015.
However, the FDA recently approved two drugs in the related field, namely Leqembi (by Biogen and Eisai) in Jul-23 and Kisunla (by Eli Lilly) in Jul-24.
Assuming three of the drugs capture the addressable market equally, this could imply TauRx is worth USD5bil, or GenT’s stake could be worth USD1bil (RM4.7bil or RM1.22 per share), which is approximately 34% of current market cap.
To be conservative, HLIB will only consider this valuation in their TP post FDA approval.
Going into financial year 2025 (FY25), HLIB believes the SPToto’s number forecasting operator (NFO) segment revenue will continue to recover to pre-pandemic levels.
Notably, FY24 NFO segmental revenue accounted for 90%-95% of pre-pandemic figures.
Nevertheless, we forecast the NFO’s earnings before interest and tax to decrease 6% year-on-year (YoY) after considering the normalisation of the prize payout ratio in FY25.
For HR Owen, car sales volume will be boosted by deliveries of various newly launched iconic models, that is Lamborghini Revuelto, Rolls Royce Spectre, Ferrari Purosangue.
“However, we foresee a flattish YoY revenue growth, factoring in the strength of the ringgit against the GBP, as well as 50% deterioration in EBIT after accounting for quarter one financial year 2025 losses,” said HLIB.
“We keep our overweight stance on the gaming sector, as we anticipate continued earnings recovery for GenS and GenM, and thus benefiting GenT, driven primarily by the improving tourist numbers,” said HLIB.
HLIB’s preferred pick for the sector is GenT, which is strategically positioned to capitalise on the recovery momentum of both GenS and GenM, as well as the potential value-add from TauRx Pharmaceutical once HMTM receives FDA approval. —Jan 27, 2025
Main image: Genting Casinos
