Genting Malaysia: BUY, target price RM3.70

Nomura Research says after recent sell down and downgrades, it believes that all the bad news has been priced in and expects earnings upgrades as the key catalyst going forward 
 
Nomura Research has upgraded its call on Genting Malaysia (GENM) (4715) to a "buy" from neutral previously, backed by strong domestic operations and Genting UK to contribute positively in the long run.

The research house said after recent sell down and downgrades, it believes that all the bad news has been priced in.

"Fundamentally, we see earnings upgrades as the key catalyst going forward," it said, noting that the company looks appealing on a risk-reward basis.


GENM's proposed acquisitions of the UK and the US casinos will exhaust most of its cash, removing the overhang of concern on its plan for its huge cash reserves.
Besides upgrading the call to "buy", Nomura also increased its target price to RM3.70 from RM2.66 previously.

The research house said competition for GENM's mass market business is likely to be shortlived where its domestic operation should continue to generate strong cash flows.

"Consensus earnings upgrades post second quarter 2010 earnings, scheduled to be released in August would likely trigger a re-rating of the stock.

by Business Times