Trading/Services: Genting Malaysia Berhad

Introduction 
Genting Resort was the brainchild of the late Tan Sri Dato Seri (Dr.) Lim Goh Tong, spent all he had in his life without earning an income to develop and expand Genting Highlands without any help from the government until it was completed and opened on 8 May 1971. Now, it is one of the most successful Casino resorts in the world and a primary tourist attraction for Malaysia.

Genting is now a group and has diversified into many other industries such as plantations, property, paper, power generation, oil and gas exploration and cruise boat industries. Distinctive names namely Asiatic, Genting Sanyen and Star Cruises are part of Genting Group. Now Genting is being managed by his son, Tan Sri Lim Kok Thay.

Genting Resorts acquired the entire gaming, hotel and resort-related operations from Genting Malaysia in a restructuring exercise in 1989.  Known as Resorts World Genting now, the resort offers six hotel with 10k rooms, over 50 fun rides, 170 dining and shopping outlets, mega shows, business convention facilities and endless entertainment - all under one roof. Resorts also owns and operates two beautiful seaside properties named Awana Kijal Golf, Beach & Spa Resort in Terengganu and Awana Porto Malai in Langkawi.Is Asia's leading leisure & hospitality company with a market capitalisation of RM17 billion.

Fundamental

1. Does the company have an identifiable durable competitive advantage?

It operates using a traditional business model where game is emphasized and little attention is paid to the environment, this means cramped and smoky casinos. The model has suited regular patrons all these years (72% of the visitors are day-trippers, 28% are hotel guests from AR 2009). This suggest that the resort is catering to gamblers. The younger crowd now have different taste & demands such as fine dining & Western culture. This is something to think about.

2. Do you understand how the product/service works?

Gamblers will emerge whenever there are dice and playing cards. Greed is part of human and will be part of our lives. Casino (Cash In Now) serves usually three distinct markets which are premium a.k.a high rollers, mid market and general gaming. For the super-rich, not-so-rich folks and for folks who just want to have fun (theme parks, entertainment, shopping and MICE). MICE stands for Meetings, Incentives, Conventions, Exhibitions & Events. To name a few, companies like Prudential and MAA have been using Resorts.

3. What is the chance that it will become obsolete (KO) in the next twenty years?
Zero for obsolete. More competitive would be more suited for the next twenty years which is certain. I was also quite shocked to know that there are 60 casinos of different sizes just 3.5 hours away from Kuala Lumpur & 17 more alone in South Korea. This number is still growing as we all know that Asia is a sweet spot for economic growth for emerging economies like Vietnam, China, India and recently Indonesia is coming back. The last three countries has sizable population to take note.

4. Does the company allocate capital exclusively in the realm of its expertise?

Yes, Genting Resorts only spends its capex on leisure and hospitality business but has diversified beyond the borders of Genting Highlands, for example Star Cruises Limited and the Awani Resorts in Terengganu and Langkawi.

5. What is the company's financial history and status?

• Why a big dip in 2000 (1999 finances)? Due to goodwill written off from subscription of Star Cruises shares of RM1bil. Goodwill means buying a stake of another company at more than fair value or book value.
• Net Profit Margin is averagely in the 30% figure. Another good factor of Genting is that they have consistent high occupancy rates of 77% to 90% from 2003 to 2009 which means they are truly maximizing their assets for profit!
• Return of Equity which means how much shareholders get in return of investment is in the 20% range over the last 10 years.
• Revenue Growth Rate has been bumpy. Attributable to Visit Malaysia in 2007, disposal & impairment losses of Star Cruises and etc. Nevermind that, to simplify I'm looking at growth rate over 10 years of 6.88% and over the last 5 years is 12.28% which shows improving performance. This kind of growth rate value is also known as CAGR - compounded annual growth rate.

• Earnings Per Share & Dividend Per Share is on the rising trend over the past 10 years. GENM's dividend payout policy has been in between 20% to 30% per share earnings. Talk about being conservative, where else do they use their money then? Read on.

6. Is the company conservatively financed?
Balance sheet is VERY IMPRESSIVE. No debts and coffers filled with ~RM5bil of which RM3bil in bank balances and RM2bil in money markets (2009).

7. Is the company actively buying back its shares?
Yes, initiated since July 2007 and to date total treasury shares (shares bought back) stands at 208 million units. Resorts has been paying RM710mil for buy backs for the last three years even at times of financial crisis because they have tremendously strong cash balance in hand.

8. Is the company free to raise prices with inflation?
I did not find any info. Thus I took the liberty of using visitor growth rate vs revenue growth rate over the last 5 years. CAGR of visitors at 5% where else CAGR of revenue is ~13% tells us that revenue actually grows faster than the number of visitors. RWG serves the Malaysian market which is 85% of their total visitors & people are willing to spend more every year so cost (with per year our national inflation) does not seem to pose any problem with spending.

9. Are large capital expenditures required to update plant and equipment?

No, Resorts is modeled on a traditional business and does not spend a lot of capex to build nicer hotels and facilities. There is no new room capacity envisaged following their most recent sharing in Investors Forum in September 2009.

Discounted Cash Flow Analysis

DCF treats a company as a business rather than just a ticker symbol and a stock price which most blind people think that price only matters. It requires you to think through all the factors that will affect the company's performance and gives you an appreciation for what drives stock values. Go to Investopedia.com and learn.

I have estimated that GENM's revenue growth rate is at 8% averagely, with 65% operating cost margin, 25% corporate tax, 2% re-investment but a growing working capital in tandem with revenue growth at 8% for the next 5 years. Having computed all these in my opinion it is fair to buy..

GENM at RM2.20 to RM2.65 for ~15-13% discount rate.

You would probably ask why the start of the drop in 1999 and the rise and fall in 2007-2008. Asian Financial Crisis in 1999 and the peak of the bull run at the end of 2007 before some profit taking takes place by smart investors and then the great collapse as we all know it. This is exactly why an intelligent investor must seek buying opportunities during a collapse (bear run) OR to buy at a discount rate from the fair value to ensure you don't overpay for it.

At RM1.30 in between 2001 to 2002 (because nobody would know what's the lowest price you can buy), the stock would have appreciated to RM2.80 in 2010 which equates to 9% returns per annum, not accounting dividend reinvestment which would give you more than a 10% figure. This assumes that you hold the stock through the 2009 financial crisis. Why would you sell anyway? Do you think a stable and rich cash company like Genting will ever see its share price drop to less than RM1 (because Genting Groups has a 50% stake in Resorts)?

What Do I Think? 

The Pros
Damn rich company. Share buy back programme (helps in increasing share price). The only licensed casino operator in Malaysia. RWS won't bite Genting Malaysia as it serves a different market. Still looking for opportunities abroad to diversify income stream because too rich ma.

The Cons
Competition is stiffing up. Gaming landscape is changing so the question is, will younger people still be interested in traditional casinos?


Last say, I would be standing on the sidelines for now seeing that GENM is quite an active stock during trading, a great buying opportunity will come when the market is actually down. The price it is at right now is fairly valued (anything above RM3.20 is overvalued) but it is still better to buy at a certain discount rate at least in the 10% range as risk compensation.

GENM is a good stock but not exactly a great one. Why? My portfolio aims for at least 15% returns per annum and GENM is not really suiting me lately. I could one day diversify and put some allocation into this stable & entrenched gaming company. I'm still young ma so find more risk lor if there is any, what I call an educated risk.

Day 1: Downtown Shanghai + Suzhou

First I must apologize for delaying Genting Malaysia Berhad posting to make way for this as I find it more interesting & satisfying to talk about my trip, too bad. Let me introduce you the crew that will be flying you to Pudong International Airport, Shanghai in China.

KLIA was almost deserted when we reached there at 11.00pm and while waiting for connecting flight to Shanghai at 1.40am we played some chor de with scorecard in Burger King. Loser by Day 9 punishable by Xiaolongbao!

Our first destination upon arrival was Chenghuang Miao (Temple of the Town God). The temple and surrounding bazaar area is one large complex devoted to the god of commerce, hence the courtyard jammed pack with people. The smell of incense is overpowered only by the smell of money & smelly tofu yierr at nearby shops. We did eat them though perfectly nice just the smell tak tahan.

Xiaolongbao a.k.a soup dumpling (crab roe in the picture), in M'sia usually called mantou but no soup. Traditionally steamed in small bamboo baskets hence the name xiaolong (small steaming basket). Their skin is smooth & translucent much like a ladies...ops I better stop. We had that for bfast & some yumcha in Nanxiang Mantou Dian. Stinky tofu is a trademark street food and is commonly deep fried and served with a spicy or sweet sauce.

We then headed to Nanjing Road, the main shopping street of Shanghai & also one of the world's busiest shopping streets. Our KL Petaling Street lose la. The street is mainly pedestrianized & decorated with neo-classical buildings with a length of around 6 km long so ladies better without high heels yay.

It was a bus ride later to Suzhou which took about 2 hours. A city on the lower reaches of the Yangtze River on the shores of Lake Taihu & occasionally nicknamed the "Venice of the East". The city is renowned for its architectural beauty of stone bridges, pagodas & gardens. It is also a well known important centre for China's silk industry even until today. The tour guide (fei chai) took us on a marathon to Suzhou Lion Grove Garden built in 1342 CE during Yuan dynasty. The name of the garden was derived from the shape of the rocks which are said to resemble lions & is a UNESCO World Heritage Site.

See the future lion king behind? I said future cuz still boi ma, roar not strong yet.

Our last pit-stop for the long day is the modern side of Suzhou. Suzhou is the second largest industrial city only next to Shanghai and is an approved national-level hi-tech zone with FDI (foreign direct investment) totally USD 13bil hosting more than 1,500 foreign companies. The Suzhou Industrial Park (SIP) is a joint cooperation between China and Singapore, with city planning leveraging from the best of Singapore. This is why when Chinaman ask me, I say I'm Singaporean :D

There's a giant LED screen on the roof top spanning 500 metres from one end to another.

Not forgetting Penang kaki loves food so we did have our rating system for the day's lunch and dinner. Lunch Beh Chiak, Dinner Hao Chi.  The Chinese there has a habit of greasing their food with oil. Just imagine an oil spill like you see in the news. What to do? So hungry, just eat nia.

Do You Really Understand Your Health Report?

Just recently completed the second annual health check, sponsored by my cheapskate company who provided basic tests but not the optional ones which are considered important in such times like cancer tests. Cancer is one of the leading cause of death worldwide just after cardiovascular diseases. Why not sponsored? Expensive ma, talk about social corporate responsibility hmmph.

Anyway intriguing it might have been that many who took the check doesn't even know what the figures in the report mean. They just see like window shopping, no critical highlights is like no sales and that's it, they are healthy. How can that happen? Because FOC le, people take it for granted. Some don't know but never bothered; too technical la doc only knows & some even say I still young ma. People give all sort of excuses, perhaps that makes us Human. 

Health has to be monitored continuously, comparing year after year & observe your health trend. Using trend is a simple and easy way to determine whether your health has been improving or vice versa. When you see no highlights but if your health is degrading slowly but not to an alarming figure yet is your definition "I am still healthy" rather than "I am starting to rot". Get my point now?

So, it's time to take charge of yourself (with some basic knowledge). Don't fully depend on doc, later like MJ's doc, cause you to die instead. I am taking my BP Healthcare Group report as an example not to hao lian (boast), maybe a bit la. Well BP has the largest medical chain of diagnostic centres in Southeast Asia, thus serving most of the people here so most of the reports should be theirs.

Private and Confidential wor, this term is commonly used everywhere. I remembered asking Pacific Fund for major unit holders and got the same answer and was pissed. If everything is PnC then how to share with people?

Lipid Profile - test on fats & oils in our body

• HDL a.k.a the good cholesterol that prevents blockage of blood vessels.
• LDL & Triglycerides a.k.a the bad lipids that clog our blood vessels by forming plagues which can lead to atherosclerosis causing heart attacks or stroke.
• Total Cholesterol is the sum of all the bad cholesterol.
• Total Chol/HDL-Chol defines the risk of developing ahterosclerosis diseases.   
• To control cholesterol have a healthy low fat diet, avoid too much meat and taking dietary supplements like omega 3 fish oils. Easiest way, cardiovascular exercise!

Blood Glucose - test on diabetic levels

• At >=7.0 level, you are in diabetic state. 
• At >=5.6 level, you are on the way to become a sweet candy. At this stage you should be really taking care of what you are eating.
• Being sweet to girls is OK but if your body is, you are at risk of developing the below problems:

Haematology Examination - test on blood cells

• The first three; total RMC, Hb and PCV tells us the quantity of red blood cells in our body.
• MCV tells us the size of our red blood cells.
• MCH & MCHC tells us the colour in measurement of our red blood cells.
• RDW is the speed in which we produce new red blood cells.
• Total WBC is our white blood cells a.k.a defence cells that can be subdivided into 5 different warriors & each of them has to be at a certain expected percentage range.
• Platelets help in blood clot when you have a wound. Not enough then you will never stop bleeding.
• ESR or erythrocyte sedimentation rate, a test that indirectly measures how much inflammation is in the body. Monitor inflammatory diseases like arthritis or even cancerous diseases.
• Rh is one causes of hemolytic disease of newborn a.k.a HDN. Disease range from mild to severe, very long topic I'll skip it. If anti-D is positive then it's Good.

Renal Function - test on the efficiency of kidneys

• The first three are electrolytes or salts circulating in our blood (sodium, potassium, chloride). Don't be too salty, want to end up as a chip?
• The next three are toxins eliminated by the kidneys. A high urea/creatinine level suggests the kidneys are not functioning to it's capacity. Mine on the other side are having to overwork Ops!
• A high uric acid shows too much protein intake from food such as seafood, eggs and beans. High uric acid is a condition known as hyperuricaemia which can cause gout or uric acid urinary stones.

Liver Function - test on protein production & toxin deactivation

• Albumin a serum protein that carry hormones in our blood. A good measure to assess someone's nutritional status as well.
• Globulin the serum protein that makes our antibodies. Both are deep topics so I'll skip details. Just have a good protein level in the liver.
• A high amount of Bilirubin can cause jaundice a.k.a yellow discoloration of the skin. A good amount is needed for cellular antioxidant.
• The below four are liver enzymes, high levels suggest liver cellular damage has occurred. These tests are sensitive indicators of liver damage or injury caused by chronic liver diseases, inflammation and etc. These tests are not testing function but rather as a screening.

Cancer Tests - examine markers as an early detection mechanism

• CA12-5: widely used tumor marker for women to detect cancers of the reproductive system which are uterus, fallopian tubes & ovaries.
• CA15-3: breast cancer (female only). Man-boobs how ah? I dunno LOL ask doc.
• Protastic Specific Antigen to check for prostate cancer or enlargement.
• Alpha Fetoprotein (AFP) to examine liver and testicular cancers.
• Carcino Embryonic Antigen (CEA) a marker to check for colorectal cancer or digestive tract cancers. If you have regular constipation or diarrahea better to check this.
• CA19-9: for grastric, pancreatic or stomach cancer. Check if you always have gastric, abdominal pains or gas.

 

Other Tests - optional but still important regardless of age

• Hepatitis B an infectious disease caused by a virus that can damage liver > cancer and you become a carrier of the disease as well. Thanks to my hao peng you advice, I got my vaccination in 2009 and now immune. HBsAg Non-Reactive and Anti-HBs over >100 means you are immune.
• Free T4 a measure of thyroid hormone which controls metabolic rate.
• Calcium & Phosphorus, electrolytes needed for bone density health.
• VDRL & HIV a sexually transmitted disease which should be Non-Reactive.
• Rheaumatoid Factor measures the risk of developing arthritis a.k.a joint pain. Having glucosamine supplements help in lowering this factor.
• Urine FEME: pH should be near neutral level of 7, negative for protein, glucose, ketone and blood. Colour either straw or yellow. Transparancy should be clear. RBC and Bacterias should be Nil as well. 
• This is a routine urine screening test which is helpful to uncover any underlying problems developing within your body. Urine FEME stands for urine full examination & microscopy examination. 

Final words...
Looking at your report and understanding your report is totally two separate entities. People are driven by urgency and importance. Urgency is normally externally administrated like your boss, work & deadlines but health is important. Don't you agree? 

Stop putting too much focus on urgent things and allocate some time into important items such as health and retirement or finances. When these important items turn to urgency it is usually too late for you to turn things around unless you start it young or early. By then you only have yourself to blame and of course no more excuses.