KUALA LUMPUR: Merger and acquisition (M&A) of Genting Bhd's 20.3 per cent-owned research and development (R&D) associate TauRx Pharmaceuticals Ltd could allow for faster monetisation versus initial public offering (IPO), RHB Research said.
The firm said while Genting did not comment on its strategy with regards to its TauRx stake, any option of value realisation or monetisation was definitely a positive after having invested in the firm since November 2012.
"For TauRx to IPO, it would need to first commercialise its lead investigative oral drug, HMTM, in 2023 and undertake listing in 2024 or later.
"Conversely, we think M&A or in-licensing agreements may allow for earlier monetisation of Genting's stake, given that large pharmaceutical firms may have M&A interest in TauRx in order to possess the world's only effective Alzheimer's treatment.
"As a plus, M&A could allow TauRx to leverage on such firms' resources to expedite HMTM speed to market," it said in a note today.
RHB Research said the HMTM drug would need to undergo 12 months of open-label trials – it could seek regulatory approvals for this Alzheimer's drug before the trial's conclusion.
RHB Research said TauRx could contribute RM1.3 billion-RM4.3 billion to Genting's financial year 2024 (FY24)-FY26 earnings, assuming a 10 per cent net margin.
"It could also fetch an upside of RM3.47-RM13.88 a share share based on 10x price to earnings ratio (P/E) on our base and bull cases for FY24 earnings," it said.
RHB said this could translates to hypothetical target price of RM9.84-RM20.25 for Genting.
"Because HMTM's path to market and TauRx's value remains uncertain, we elect not to include the latter in Genting's valuation for now," it added.
RHB Research has maintained its "Buy" call on Genting, with an unhanged target price of RM6.37.
"TauRx's value accretion aside, we believe Genting's entities' recoveries makes it an attractive value 'Buy' with significant upside.
"At the current share price, investors are essentially getting its non-listed assets (potentially 20 per cent of TauRx) for free. Key risks include a prolonged pandemic, decrease in luck factor, and regulatory risks," it said.