UBS cuts Genting stock rating, lowers price target to MYR3.10

UBS downgraded Genting Bhd (GENT:MK) to Neutral with a reduced price target of MYR3.10 from MYR5.90, citing concerns over slowing growth momentum in Malaysia and a slow recovery in Las Vegas, which could constrain dividend flow. While Genting maintains strong financial health with a current ratio of 2.48, UBS forecasts flat earnings for FY25 with a dividend yield of approximately 4%; the firm expressed a preference for Genting Singapore due to higher dividend and earnings visibility.

Analysis

UBS has downgraded Genting Bhd (GENT:MK; OTC: GEBHY) to Neutral from Buy, significantly reducing its price target to MYR3.10 from MYR5.90, primarily due to anticipated diminishing growth momentum in 2025 for the $2.75 billion market capitalization company. This slowdown is attributed to a high comparative base in Malaysia and a sluggish recovery in Las Vegas. Further pressure on Genting Bhd's dividend flow is expected from potential capital expenditures by its subsidiary, GENM, in New York. Despite these concerns and the stock trading near its 52-week low, InvestingPro data highlights Genting Bhd's robust financial health, evidenced by a current ratio of 2.48, a low price-to-book ratio of 0.36, an impressive 18% free cash flow yield, and a consistent 19-year dividend payment history. UBS forecasts flat earnings for Genting Bhd in fiscal year 2025 with a dividend per share of RM0.11, translating to an approximate 4% yield, and views the current trading at a ~66% net asset value discount as fair, aligning with its two-year average. In contrast, the outlook for Genting Singapore (GENS) is improving, supported by a strong balance sheet and upgraded amenities, which are projected to drive steady dividend streams and earnings growth in the latter half of 2025, leading UBS to express a preference for GENS within the Genting group due to its higher dividend and earnings visibility.

Key Decisions for Investors

• Investors should acknowledge the headwinds for Genting Bhd, including UBS's projection of flat earnings for FY2025 and potential constraints on dividend growth stemming from subsidiary capital expenditures and slowing momentum in key markets such as Malaysia and Las Vegas.
• Despite the downgrade, Genting Bhd's current valuation near its 52-week low, a price-to-book ratio of 0.36, an 18% free cash flow yield, and a forecast 4% dividend yield might warrant consideration for value-oriented, income-seeking investors, though with tempered growth expectations given UBS considers its current NAV discount fair.
• Consider focusing on Genting Singapore (GENS) for potentially better near-term growth and dividend visibility within the Genting group, aligning with UBS's preference based on its improving outlook and upgraded amenities.
• Closely monitor the recovery pace in Las Vegas, the actual impact of GENM's New York capital expenditures on Genting Bhd's dividend capacity, and the performance trajectory of Genting Singapore's upgraded facilities to reassess positions.