Date: October 10, 2024
Broker: CGS International Securities Malaysia Sdn. Bhd.
Company Overview
Genting Malaysia Berhad (GENM) is positioned as a key player in the tourism and hospitality sector, benefiting from a recovery in tourism and increased foreign visitor arrivals. The company operates resort and casino properties, attracting both international and domestic tourists.
Investment Rating and Target Price
CGS International has maintained an “Add” rating on Genting Malaysia, with a revised target price (TP) of RM3.65. This valuation is supported by a 3-year earnings per share (EPS) compound annual growth rate (CAGR) of 42% and an attractive dividend yield of 6-8%.
Earnings Outlook
The company is set to experience earnings growth in the coming quarters, driven by:
- Tourism Recovery: Strong recovery in foreign visitor arrivals, particularly from China, combined with robust domestic tourism.
- Financial Metrics: Genting Malaysia is trading at a CY25F price-to-earnings ratio (P/E) of 13.4x and a CY25F enterprise value-to-EBITDA (EV/EBITDA) ratio of 7.3x, which the analysts view as undemanding.
- Free Cash Flow (FCF) and Dividends: The company is generating strong free cash flow, which supports its attractive dividend yields of 6-8%.
Valuation and Growth Potential
Genting Malaysia’s current valuations are seen as attractive, especially considering its future growth potential:
- CY25F P/E: 13.4x
- CY25F EV/EBITDA: 7.3x
The company’s strong free cash flow generation supports its growth and dividend sustainability, making it an appealing investment in the tourism recovery space.
Analyst Commentary
CGS analysts reiterate their confidence in Genting Malaysia as a key tourism recovery play. Despite being unloved by the market, the company is well-positioned to benefit from improving foreign visitor arrivals and strong domestic tourism growth. The combination of earnings recovery, dividend yields, and attractive valuations makes Genting Malaysia a compelling investment opportunity in the coming quarters.
Broker’s Outlook
CGS International remains positive on Genting Malaysia’s outlook, expecting the company to deliver strong earnings growth supported by tourism recovery. The stock’s valuation, combined with its free cash flow generation and attractive dividend yields, makes it a valuable addition to portfolios looking for exposure to the tourism sector.
