In September 2009, I posted that Genting SP was approaching its January 2007 high of S$1.20- a natural resistance for the stock. While Genting SP's uptrend might continue if it could break above the S$1.20 level, I had my doubt & recommended profit-taking (here). I'd anticipated a reversal for the stock but it did not materialize. Genting SP held firmly above S$1.00. It even went on to complete a Rights Issue of 1-for-5 at S$0.80 each in September.
From October to December 2009, Genting SP was consolidating in a descending triangle. It broke to the upside of that triangle in mid-December & made a new high. The follow-through rally faltered & a 'double-top reversal' was sighted in late January. In the past 4-5 days, Genting SP had been testing its strong horizontal support at S$1.05. This horizontal support may not hold for long. If Genting SP finally broke below the S$1.05 support, a quick selldown would ensue & the share price would probably retreat to S$0.80, the subscription price of the last Rights Issue.
With the 'double-top' reversal sighted, the outlook for Genting SP is bearish. Those with long position in this stock should reduce their position accordingly.
Chart: Genting SP's daily chart as at Feb 4, 2010 (source: SGX)
Note: The above chart is obtained from SGX, where prices had not been adjusted to reflect the impact of a corporate exercise (such as the recent Rights Issue).
12 comments:
hi Alex.. may u please tell me what is Loan right? and how does this Redtone Loan right(Redtone-Lr) works?? really got no idea about it...
Hi Loryau,
Redtone is having a Rights Issue of 10 ICULS (c/w 4 free warrants) for every 10 shares owned. The cost of the ICULS is RM0.10 each. The Redtone-LR refers to the Rights to subscribe for this ICULS. So, if you buy 10 LR at the present price of RM0.035, you can subscribe for 10 ICULS at RM0.10. The end results is you would own 10 Redtone-LA (the designation for the ICULS) and 4 free Redtone-WA, costing a total of RM1350.
The main terms of the securities are:
1) Redtone-LA
- Exchangeable to share, at a ratio of 2.5 Redtone-LA to 1 share, from the 1st day of listing.
- Tenor: 10 years
- Interest rate: 2.75% pa
2) Redtone-WA
- Exercise Price: RM0.25
- Tenor: 5 years
Assuming Redtone remained at about RM0.26, Redtone-LA would be valued at about RM0.105 (share price/2.5) & Redtone-WA would be valued at about RM0.050 (20% of share price). Total value: RM1250.
Based on the above, I think it is not worthwhile idea to buy Redtone-LR & then subscribe for the ICULS. It is possible that Redtone-LR may drop in price over the next few trading days, due to arbitraging activity. The only time this idea may be workable is when Redtone-LR trades at RM0.01. At that price, the total cost of getting 10 Redtone-LA & 4 Redtone-WA would be about RM1100. Their total value may drop to RM1100-1200- in line with the decline in the price of Redtone (due to arbitraging activity). We can see that it is possible that the idea may be profitable if Redtone-LR cost is negligible.
Finally, I must say that I am not excited about the prospect of Redtone going forward. Its WIMAX business (under the Computer-telephony segment) will face tough competition. Its other business segments (Communication Services & Digital TV) are either shrinking or not making any impact. Best to avoid Redtone.
oic... thanks for the info Alex... have a nice day ya...
Hi Alex,
I have 2lots of share in Genting SP at the price of 0.87. Should I sell it and buy it again when reach 0.80 or hold on ? I'm thinking of holding this Genting SP share for long term.
Hi David,
I know many investors are holding on to their Genting SP for the long-term. Using technical analysis, I can only say that the probability of this stock going lower is about 60%. The next thing to ask is: Can it go below S$0.80? I believe it is possible because the stock has moved from being a concept stock to a real thing, where people can value it using the usual fundamental tools, such as PER, etc. When a stock is a concept stock, analysts can dream of all kinds of numbers. But, when you are dealing with a company with running operation, you can't let your imagination run wild. Even when things go well, there will be some disappointment. The first disappointment was the delay in the opening of the casino for Genting SP (which was slated to open before CNY). Imagine if the number of visitors to the theme park is off the forecast!!! FYI, The Hong Kong Disney Theme Park is still a loss-making concern!!!
When unpleasant things happened, investors will start to look at another casino company; one without borrowings, but sitting on RM6.0 billion cash. That's casino company is the sister company, Genting Malaysia (GENM). GENM (currently trading at RM2.78) is backed by RM1.10 cash and has an earning of 23 sen per share. Ex-cash, GENM has a PER of 7.3 times.
Dear Alex,
Thanks for your early signal to us,
appreciated that!
Genting SP is forming a head and shoulder pattern, izit?
Thanks
Hi Alex,
Genting surged to 1.18 moments after 3, and eventually closed at 1.11. Do you anticipate another resistance test?
Cheers!
Gostan
Hi,
Mean that you genm is good to go in rite? what price is the best range to go in? tx for your info.
Thank for the valuable advise.
Hi kit,
It is possible that it may evolve into a Head-&-Shoulder formation- with the Left Shoulder already formed; the Head being the twin peaks at RM1.30; & the Right Shoulder on the way. If a H-&-S formation were to develop, the most important thing to look out for would be the neckline at RM1.02-05. A break below the neckline would confirm a bearish reversal, while a failure to do so would turn the H-&-S into a bullish continuation pattern.
Hi Gostan
Genting surged to an high of S$1.18 in late afternoon trading on Friday, and eventually closed at S$1.11.
You may learn that the reason for the surge is the granting of the license to Genting SP to commence the casino operation (see the latest issue of The Edge). Would this change the dynamic of this stock? Not really, but it should remove some of the negative vibes relating to the stock of late. With this, the stock may be able to hold at the current price level a while longer. However, it's best to watch how the market would react to it and then calibrate our action accordingly.
Hi Teh,
GenM should have good support at the RM2.70-80 level. However, if it breaks below that level, it would turn bearish, from the technical perspective. Should one sell if the technical picture points to a bearish outlook? It is one of those dilemma that one faces when the fundamental analysis crashes with the technical analysis. You have to decide whether you are a long-term investor; in which case, you should hold (or, buy). On the other hand, if you are a short-term trader; you may choose to sell & maybe buy back later.
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