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Genting Bhd - Venturing into pharmaceuticals?

kiasutrader
Publish date: Thu, 22 Nov 2012, 09:49 AM

News   It was announced on TauRx's website that Genting Management (Singapore) Pte Ltd (GMS), a wholly-owned subsidiary of GENTING, had invested USD31.5m in TauRx Pharmaceuticals Ltd.

 This is the first tranche of a total investment of USD111.8m by GMS in TauRx in exchange for a 20% equity stake. The remaining USD80.3m investment is expected before the year-end.

 TauRx has also announced the appointment of GENTING's Chairman & CEO, Tan Sri Lim Kok Thay and President & COO, Mr Tan Kong Han as the Board of Directors of the pharmaceutical firm.

Comments    This non-gaming venture came as a surprise to us as the company's intention is to be mainly focused on growing its casino business. 

 The size of the investment is insignificant against the group's equity fund of RM19.2b. As such, we are neutral on this venture as it is not synergistic to the group's current businesses.

 Note that GENTING itself has yet to make any official announcement on this matter. 

 TauRx was established in Singapore in 2002 with its primary research facilities located in Aberdeen, Scotland. It is a clinical stage pharmaceutical company focusing on the discovery of therapies and diagnostics for neurodegenerative diseases of the central nervous system.

 In particular, the company is developing Tau Aggregation Inhibitors to slow or halt the progression of Alzheimer's and related diseases. 

Outlook   We are unable to quantify the earnings impact from this venture to the group at this juncture, although we believe that it should be immaterial.

Forecast   No changes to our estimates. 

Rating  Maintain OUTPERFORM

Valuation    We are keeping our TP on GENTING unchanged at RM10.09/share based on a 20% discount to its SOP while awaiting its results to be released later this month. 

Risks   Risks to our call are 1) poorer luck factor and 2) a substantial decline in CPO prices.  

Source: Kenanga
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