Genting & Resorts- cheaper than its peers

In the April 27 issue of the Edge newsletter, there is an article entitled "A relook at regional casino players", where the writer presented the various casino players with their share price performance, PE & Gearing ratio. I have reproduced the table below.



You will see that Resorts & Genting are among the healthiest casino players with large cash balances as well as trading at reasonable PE of about 11-14 times (as at April 22nd).

From Chart 1 below, we can see that the index for a gaming ETF, Market Vectors-Gaming ETF (BJK), which is traded on AMEX. BJK was launched by Van Eck Global in January 2008 and it provides targeted exposure to 69 companies worldwide that are engaged in the gaming industry. Since its listing, BJK has been in a downtrend- making low of about 12.5-13.0 point in both November-December 2008 & again in February-March 2009 (ignoring intra-day low of 11.50 in early March 2009). Thereafter, BJK has been rallied higher until it has tested its medium-term downtrend line resistance at 20 to 21 points. This level is also a strong horizontal resistance level. As such, BJK is now at a crossroad, with the possibility of a short-term correction.


Chart 1: BJK's daily chart as at 1/5/2009 (Source: Stockcharts.com)

The best performers are the highly leveraged players such as Las Vegas Sand (LVS), MGM Mirage (MGM) and Wynn Resorts (WYNN), which have enjoyed price gain of 150-460% (with LVS being the biggest gainer). Our local casino players, Genting & Resorts have also registered decent price gained but nothing as spectacular as LVS or MGM (of 340%). Genting's share price jumped 58% from its low of RM3.08 to its recent high of RM4.88, while Resorts' share price gained 40% from its low of RM1.84 to its recent high of RM2.57.

Genting has broken above its accelerated downtrend line at RM3.90 in early April, but has recently failed to break above its medium-term downtrend line that dates back to April 2007. This downtrend line plus the 50-week SMA are likely to cap Genting's upside for now. If a correction were to set in, one should look to accumulate Genting near its 20-week SMA support of about RM4.20.


Chart 2: Genting's weekly chart as at 4/5/2009_12.20 noon (Source: Quickcharts)

Resorts has broken above its accelerated downtrend line at RM2.20 in early April, but has yet to test its medium-term downtrend line that dates back to July 2007. The 50-week SMA are likely to cap Resorts' upside for now. If a correction were to set in, one should buy Resorts near its 20-week SMA support of about RM2.30.


Chart 3: Resorts' weekly chart as at 4/5/2009_12.15 noon (Source: Quickcharts)