KUALA LUMPUR (June 21): Potential earnings from Genting Bhd's (KL:GENTING) nearly RM5 billion expansion of its energy business will trickle in over the longer term, said analysts.

Genting’s investment in a 1,490-megawatt gas-fired power plant project in China that comes with “reasonable” internal rate of returns of 8%-15% will be accretive to earnings and equity valuation, given that most of the cost will be debt financed, said Maybank Investment Bank.

On Thursday, Genting signed an agreement to acquire 49% shareholding in SDIC Jineng (ZhouShan) Gas Power Generation Co Ltd. SDIC Jineng is a project company set up to own and develop the plant in the Zhoushan city and has achieved 10% progress since construction works started in late 2023.

Philip Capital is also positive on the acquisition, which may generate an additional revenue of RM40 billion over 25 years. That means an annual revenue of RM1.6 billion from 2026 onwards for Genting, according to the research house’s estimates.

The project will see revenue contribution from Genting's power segment rising to 8% in 2026, from 4% in 2023, while having minimal impact on Genting’s balance sheet backed by strong, free cash flow, the house noted.

Genting also announced that it has awarded an engineering, procurement, construction, installation and commissioning (EPCIC) contract for a FLNG facility with capacity of up to 1.2 million tonnes per year.

The FLNG facility will allow Genting to finally monetise its gas fields in Indonesia, Maybank Investment Bank said. That could add RM6.45 billion to Genting’s equity value, or RM1.68 per share to its target price, its rough estimates show.

For the EPCIC contract, financing cost may rise by an additional RM156 million, raising net gearing to about 55% from 45% at the end of 2023 if Genting takes on the entire RM4.6 billion project cost, according to Philip Capital’s estimates.

That would lower the research house’s 2024–2025 earnings-per-share forecast by around 7% after factoring in the higher financing cost, which may affect near-term dividend payouts, Philip Capital flagged.

Both research houses, however, have maintained their earnings forecasts and target prices, pending more details from Genting.

At noon break on Friday, Genting's shares traded 12 sen or 2.56% higher at RM4.81, valuing the company at RM18.56 billion. The counter has gained over 6% since the beginning of the year.

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