KUALA LUMPUR: Nomura Securities Research Malaysia says the worst is over for Genting Malaysia (GentingM) after the recent sell down and downgrades by the market.

"We believe that all the bad news has been priced in. Fundamentally, we see earnings upgrades as the key catalyst going forward," it said on Thursday, July 15.

Trading at 4x FY11F EV/EBITDA, the research house said GentingM looked appealing on a risk-reward basis. Its proposed acquisitions of UK and US casinos will exhaust most of its cash, removing the overhang of concern on its plan for its huge cash reserves. Upgrade to BUY; target price RM3.70.

The consensus earnings upgrades post 2Q10 earnings, scheduled to be released in August 2010, would likely trigger a re-rating of the stock.

GentingM offers investors good exposure to the strong and rising domestic consumption story. Competition for its mass market business is likely to be shortliv! ed. Its domestic operation should continue to generate strong cash flows.

Nomura Research said GentingM?s latest move, of proposing to spend most of its cash reserves on two acquisitions, confirmed its view that paying out its cash reserves in the form of higher dividends was the last thing it was contemplating.

The research house said after a series of downgrades by the Street attaching zero value to its cash reserves, there is nothing much left for the market to discount. The latest move also helped remove an overhang on its intention for its cash reserves.