STOCK FOCUS OF THE DAY
Genting Bhd : Drug trials not
positive HOLD
We are downgrading Genting Bhd from BUY to HOLD with a lower
fair value of RM9.66/share vs. RM10.20/share previously. We have increased the
holding company discount from 5% to 10% as the market is expected to give a
higher risk premium to Genting Bhd following the failure of TauRx's drug
trials. Yesterday, TauRx Pharmaceuticals announced the results of its Phase 3
clinical trials. TauRx said that its drug, LMTX only worked if people were not
taking other Alzheimer drugs. The tone from news wires is negative. Reuters and
Wall Street Journal (WSJ) said that the drug had failed to improve patients'
cognition or daily functions.
According to WSJ, patients received LMTX on top of their
existing Alzheimer medications in the trials. After 15 months, patients taking
LMTX did not perform any better than the placebo when it came to cognitive
tests. TauRx said that it intends to seek regulatory approval for LMTX as a
monotherapy drug. This means that patients can only take LMTX as their sole
drug for Alzheimer's. It remains to be seen if regulatory agencies in US and
Europe would require TauRx to carry out more studies. This development is
negative for Genting Bhd. Genting Bhd's share price has risen in the past
couple of days on speculation that the drug trials would be successful and as
such, TauRx would be able to commercialise the drug and list on Nasdaq in
2017F. Genting Bhd owns a 20% stake in TauRx. Without the positive news flow,
Genting Bhd's share price is expected to be unexciting as operating conditions
for the casino industries in Singapore and UK are likely to be soft. Genting
Singapore is forecast to release its results on 4 August 2016. Based on Marina
Bay Sands' 2QFY16 performance, there is risk that the group's financial results
may not be inspiring. Genting Singapore accounted for 45.6% of Genting Bhd's
EBITDA in 1QFY16.
QUICK TAKE
Felda Global : Tie-up with Tradewinds
Group? SELL
ECONOMIC HIGHLIGHTS
US : Fed has become wiser
NEWS HIGHLIGHTS
AirAsia : Load factor continues to grow, positive on 2Q
earnings
Mah Sing Group : Expects Meridin East to be highly
sought-after project
Manufacturing Sector : Texchem sinks deeper into losses as
food business eats up earnings
Oil & Gas Sector : Barakah gets RM38mil from Sarawak
contract
Insurance Sector : Syarikat Takaful Q2 earnings up
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