Genting Bhd
(Sept 6, RM8)
Maintain buy call with an unchanged target price (TP) of RM9.55: TauRx Pharmaceuticals Ltd — in which Genting Bhd has a 20.7% stake, reported its TRx-237-007 Phase 3 results of LMTX in behavioural variant frontotemporal dementia (bvFTD) at the 10th International Conference on Frontotemporal Dementias in Munich, Germany, and released a statement stating that it failed to achieve its co-primary end points.

With the latest development, we believe TauRx is considered a lost bet for Genting given that any sort of monetisation plan (if any) may take a longer time as more resources would be needed to examine the deficiency of LMTX® in treating both Alzheimer’s disease and bvFTD, despite some positive findings uncovered from the trials. 

We understand that TauRx still intends to meet the European Medicines Agency and US Food and Drug Administration for its experimental Alzheimer’s drug LMTX® as a monotherapy but they concede that it is a lengthy procedure and no time frame is set.

As of now, two out of three Phase 3 clinical trials on the second-

generation TAU, LMTX had failed to meet its co-primary end points in Alzheimer’s disease (TRx-015) and bvFTD (TRx-007). 

The clinical results of the third trial (TRx-005) in up to 800 patients diagnosed with mild Alzheimer’s disease will only be published in the fourth quarter of 2016.

We believe that investors have largely priced in the perceived failure of LMTX® in treating both Alzheimer and behavioural variant frontotemporal dementia. 

Hence, any positive development from TauRx trials hereon will be a positive upside risk rather than a  downside risk.

The hardly hit overseas business operations (UK, Singapore) have been dragging Genting as a group but we notice some improvements and more stability is expected moving forward where the importance of operating efficiency is being placed upon given the overall challenging business environment.

We maintain our “buy” rating on Genting given its undemanding valuation for a diversified, cash-rich position holding company and a proxy for growth from its various undergoing expansion plans set to bear fruit from 2017 onwards. Our TP of RM9.55 remains unchanged as we have not factored in any valuation from TauRx. — Hong Leong Investment Bank Research, Sept 6