Genting unleashes its war chest, enters Las Vegas

Genting Berhad is an investment holding and management company. The principal activities of the subsidiaries include leisure and hospitality, gaming and entertainment businesses, plantation, the generation and supply of electric power, property development and management, tours and travel related services, genomics research and development, investments and oil and gas exploration, development and production activities. The principal activities of the Company's associates include the generation and supply of electric power, resort, property investment and property development. The Company has over 4,500 hectares of prime resort land and about 134,000 hectares of plantation land.

Stock Rating: OUTPERFORM (BUY NOW)

Price: RM9.46

Target price: RM12.60  

based on average PE 18 due to monopolistic position

Fundamentals: Long Term Outperform (5-year period)

Technical: Short Term Bullish (3-month period)

Risk Level: Medium-High

**Outperform: Stock expected to do better than market return; has upside or cheap vs target price. Usually a buy call.
**Market perform: Stock expected to be on neutral, can be + - 3% to 5% either way; Usually a hold call.
**Underperform: Stock expected to do worse than market return; has downside or too expensive to buy vs target price. If fundamentals change a sell call.


Fundamental Analysis

Revenue/EPS: CAGR of ~7%. Turnover growing steadily ever year as evident from growing EPS.
Dividends: Roughly 1% and no dividend policy. Genting is a capital gain investment.
Debt-to-equity Ratio: 0.80. On the high side but still less than 1.
Liquid asset-to-share Ratio: 3.84! Has a tremendous amount of cash in hand. Nullifies the debt side ratio.
Return on Capital Employed: Performing at ~15%. Anything amount above 10% is good.
****For more information download my worksheet from my dropbox: Aboi_Hybrid_PEGGY_method

EPS growth correlates increasing share price with PE range of 10-18

Technical Analysis

VSA Shakeout - signs of strength
This is intended to remove many investors and traders from the market, obviously all those un-pros. News will be bad and this is used by the pros to panic people out of their positions. Usually after a shakeout the market will move sideways with low volume because the pros would try to buy as much of the stock as they can, without significantly putting the price up against their own buying. This stage is called the accumulation phase; some last for a few days, I have seen some for weeks.

VSA Stopping volume - signs of strength
This results from buying orders from market professionals which are large enough to stop a down move. Seen as a high volume down day but usually closing in the middle or the highs. Stopping volume is a point where demand overcomes supply.


In The News
With its RM 21 billion in cash war chest and eyeing the growing influx of Chinese and other Asian tourists to Las Vegas, Genting plans to start construction on a new multibillion-dollar casino complex called Resorts World there next year. If Genting goes through with the project, it will be the first major casino initiated in the wake of the economic downturn of 2008, a potentially major milestone for Las Vegas that could usher in a new era of opulent buildings—or hasten the decline of others.

Genting intends to build a multi-billion dollar casino with 3,500 hotel rooms, a convention center and a 4,000-seat theater. The company is spending $350 million on the purchase, or $4 million an acre. The price is among the lowest in a decade for Strip property. That means the resort corridor is still far from the days in July 2007 when a developer spent nearly $34.7 million an acre for empty land. What a bargain! $4mil (now 2013) vs $34.7mil (pre-crisis). 

A person familiar with Genting's thinking said the company is finally striking in Las Vegas in part because it sees a rise in visitors and spending involving Chinese travelers. Genting may have an advantage in attracting them because it operates casinos in Singapore and elsewhere that attract Chinese gamblers. Yet unlike three of the four major Las Vegas casino companies, it doesn't have a presence in the most important gambling market in the world—China's gambling enclave of Macau.

The Genting conglomerate opened its first casino in 1971 in Malaysia and now operates sites in New York state, the Philippines, United Kingdom, Singapore, and the Bahamas. Genting is also in the top 1000 companies of Forbes Global 2000 ranking. Other recent news: Genting's 4Q within expectation

Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.