By AmResearch
21 November 2012
BUY
Price: RM9.20
Fair Value: RM10.85
• Bloomberg reported that TauRx Pharmaceuticals Ltd (TauRx) has received further investment of US$31.5mil from Genting Management (S) Pte Ltd, which is a subsidiary of Genting Bhd.
• The amount represents the first tranche of a total investment of US$111.8mil by Genting in TauRx in exchange for a 20% equity stake in the pharmaceutical company.
• The completion of the remaining US$80.3mil investment by Genting is expected to take place before year-end. TauRx announced that Tan Sri Lim Kok Thay would be appointed to the company’s Board of Directors.
• TauRx’s headquarters are in Singapore. However, its research facilities are in Aberdeen, Scotland. TauRx aims to develop new treatments and diagnostics for a range of neurodegenerative diseases.
• It is currently involved in the development of LMTX drug, which aims to treat patients with mild to moderate Alzheimer’s disease.
• We are neutral on Genting Bhd’s investment. Although the investment sum of US$111.8mil or RM342mil is not huge, we are puzzled over the rationale of the investment as it is not part of Genting Bhd’s core operations. In 2010, Genting Bhd invested in a 20% equity stake in Union Bank of Colombo, Sri Lanka.
• The shareholding of 20% would allow Genting Bhd to equity-account TauRx’s financials. However, as the development of the LMTX drug is still on-going, we doubt if there would be any earnings contribution.
• We estimate that at the company level, Genting Bhd has more than RM3bil in cash reserves. This is due to the disposal of Genting Sanyen Power Plant to 1MDB for RM2.3bil and issuance of RM2bil MTN in June 2012. As at end-FY11, Genting Bhd’s net cash at the company level stood at RM586.5mil.
• Currently, we have a BUY recommendation on Genting Bhd. The group is scheduled to
release its 3QFY12 results next week.
[Source]
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