In this week’s The Edge paper, broker RHB has placed a target price of MYR8.40 per share (vs  closing price of MYR6.40 as of 5 Dec) for Genting Berhad. The basis for the target price is based on sum-of-part valuation approach. Genting Berhad has major ownership in three other ListCos e.g Genting Malaysia, Genting Singapore and Genting Plantation.

The Edge Write Up.jpg

Let’s do a simple multiple regression analysis to ascertain to what extent is Genting Berhad overvalued or undervalued based on relative price reference to its 3 listed subsidiaries. As shown below, the share prices of the respective Genting entities trade in tandem with one another:

relative price - Genting.png

The following table shows a high price correlation in which >90% in share price variability of Genting Berhad can be explained by share price movements in Genting SG / Genting MY / Genting Plantation.

Genting Relationships.png

Based on the above regression relationship, a simple desktop forecast shows that the current share price of Genting Berhad (MYR6.26, 7 Dec 18) is relatively lower than its forecasted value of MYR7.62 per share. In addition, the current share price is also below that of 95%-confidence interval range of MYR6.46 – 8.79. 

Forecast.png

 

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