• GENT is trading at a 35% discount to SOP/sh, which is more than –1SD to its long-term mean of 21% discount to SOP/sh.
• Steep discount is not justified; we forecast strong 3-yr core earnings CAGR of 17% with a bumper growth in FY17 at 42%!
• LT earnings growth also driven by the ‘under-researched’ Banten IPP. Maintain BUY with a revised TP of MYR9.20 (-2%).

What’s New

YTD, GENT’s share price has fallen 16%. In fact, GENT is trading at a steep 35% discount to our SOP/sh valuation, which is more than – 1SD to its long-term mean of 21% discount to SOP/sh. In this writeup, we examine whether the fall in GENT’s share price is justified by examining the earnings prospects of its major subsidiaries. For Genting Malaysia (GENM MK, BUY, TP: MYR4.55), our bullishness on the Genting Integrated Tourism Plan (GITP) is well documented. For Genting Singapore (GENS SP, BUY, TP: SGD0.86), its hitherto poor results were due to low VIP win rates which should normalize. For Genting Plantations (GENP MK, BUY, TP: MYR10.55), we favour it as a potential El Nino beneficiary.

What’s Our View

Differing from consensus, we are also bullish on GENT’s power segment, which is under-researched. We estimate that 95%-owned Banten independent power plant (IPP) will generate a whopping ~MYR800m EBITDA p.a. post-FY17.

With our revised GENP and GENS estimates made on 2 Sep 2015 and 22 Oct 2015 respectively, our revised FY15/FY16/FY17 GENT core earnings estimates are now lower by 3%/5%/2%. In all, we forecast GENT’s FY14-FY17 core earnings will grow at 17% CAGR with the strongest earnings growth in FY17 at 42% YoY! We reiterate our BUY call although with a slightly lower SOP-based TP of MYR9.20 (MYR9.35 previously) post house-keeping. We like GENT for three reasons: (i) cheaper proxy to the GITP at GENM; (ii) cheaper proxy to GENS; (iii) Banten IPP to stabilise group earnings.

Source: Maybank Research - 28 Oct 2015