GENTING: A breakout

Laggard blue chip. KLCI kicked off 2024 on a positive note, advancing 2.8% YTD, buoyed by an influx of foreign buying. Among the standout performers are YTLP, YTL, and AXIATA with impressive YTD returns ranging from 7% to 35%.  In contrast, GENT, being one of the blue chips that is trading at a 60% discount against their 10-year average P/E, posted a comparatively modest YTD return of 6%, trailing behind GenM's 6.6%. We reckon that GENT’s current valuation has yet to fully reflect the recovery potential of both GenS and GenM, alongside the growth prospects of RWLV. Additionally, it's worth noting that GenT currently trades at a 16% discount to the value of its stake in GenS. To recap, GENT's market capitalization has historically traded at an average premium of 43% (as opposed to the current discount of 17%) relative to its effective stake in GenS over the past 10 years.

Tourism angle remains intact. In our 1H24 strategy report, we highlighted the ongoing recovery in tourist arrivals to Malaysia as a key theme for 2024. GenT stands out as a key proxy, given its strategic holdings in GenM (49.3%) and GenS (52.6%), positioning the group to leverage the recovery momentum of both entities. Our optimism is rooted by the anticipation of a sustained rebound in foreign tourist arrivals to both Malaysia and Singapore, driven by the recent visa-free travel agreement between China and the two nations, which is expected to bolster GenM and GenS’s FY24 earnings. Furthermore, major music events, such as concerts featuring Coldplay and Taylor Swift in Singapore, are anticipated to play a substantial role in enhancing tourist arrivals, particularly benefiting RWS. All in, our top pick for the gaming sector is GENT with a TP of RM6.95, indicating a lucrative potential upside of 42%.

A rectangle breakout. Yesterday's breakout above the rectangle pattern signals a potential resumption of the uptrend, possibly propelling the price towards RM5.15-5.28-5.46. Cut loss at RM4.52.

Collection range: RM4.74-4.85-4.90

Upside targets: RM5.15-5.28-5.46

Cut loss: RM4.52

Source: Hong Leong Investment Bank Research - 9 Jan 2024