Wednesday, December 22, 2010

GenM in another casino venture

Genting Malaysia Bhd today confirmed that it- together with a partner, Vina Capital- has obtained approval from the government of Vietnam for a US$4 billion (RM12.53 billion) casino resort project in Hoi An city. For more, go here.

Readers may recall my numerous positive posts on GenM (an example here) but this stock has disappointed many. It even lagged behind its younger "siblings" such as Genting SP & Genting HK (see this post).

At one stage, GenM sat a cash pile of more than RM6 billion & many analysts & investors were hoping that GenM would declare a bumper dividend or capital repayment but alas none was forth coming. Instead of rewarding its shareholders with cash handouts, GenM has begun to invest the funds in casino ventures, starting with the acquisition of the Genting group's casino interest in UK (here) & then venturing into a racino business in New York (here). The above announcement confirms the trend of more future casino ventures to come for GenM. This news flow- some positive, some not so- could stir up interest in this much-neglected stock.

From the chart below, we can see that GenM (closed at RM3.29 yesterday) is resting on its medium-term uptrend line at RM3.30. Its overhead downtrend line resistance is at RM3.45. It is relatively safe to take a position in GenM at the uptrend line. If the stock can break above the RM3.45 level, it could be a trading BUY.

Chart: GenM's daily chart as at Dec 21, 2010 (Source: Quickcharts)

For those with a more aggressive appetite, you may try GenM-JA or GenM-CL. The former is like a Callable Bull Certificate (or 'CBLC'), which is very similar to a Call Warrant (or 'CW') except it has the added feature of having a Mandatory Call Event ('MCE') which automatically forces the issuer to recall the CBLC when it hit a Minimum Trading Price ('MTP') (for more, go here). At a premium of 3%, GenM-CL is the cheapest structured instrument but it has a relatively short lifespan of about 2 months. Gen-JA has a longer lifespan than GenM-CO as well as trading at a premium of half that of GenM-CO. My preference is for GenM-JA.

Table: GenM's CWs & CBLC valuation & terms

Based on the above, I believe GenM remained a good stock for long-term investment.


Ivan said...


Correct me if I am wrong, the MACD for GENM seem negative. Does it give a sign that GENM may drop in near term? 10s and happy merry x'smas :)

Ivan said...

Will that good if GenM cancel their treasury holding shares on GENM? What will the chances for GENM management to cancel their stake? 10s

leslieroycarter said...

Invest in Genting only hope for the capital gain thru speculation . If this stock fails to stir up frenzy buying or selling , nothing will come out of it. The mgt has opted to utilise the accumulated funds by buying other gambling casinos instead of giving some goodies to their minority shareholders . These options r good for the majority shareholders but at the expense of minority shareholders . I think as minority shareholders we should avoid genting stock n its derivatives because it is v detrimental to us by withholdings monies meant for us for their own gains.

Lim said...

Hi Alex,

Any comment on Malton?


Alex Lu said...

Hi Ivan

MACD for GENM is slowly turning upward. If you look at the ADX, the +DMI & -DMI are both pointing lower. This means that the stock is likely to trade sideway. Let's see whether the news of the Vietnam venture could shift the direction of the share price movement in the near term.

Alex Lu said...

Hi Ivan,

I have no idea on how GenM's management will treat the treasury stock.

Alex Lu said...

Hi ayseng

There is some truth in what you have written. However, if the Vietnam venture has good potential- which I think it has- then GenM's management should pursue it. Given a choice between good payout dividend or to invest in a good project, I think management & shareholders should have qualm as to which one to choose. But you are right in some way- GenM's management track record of rewarding its shareholders sucks!

Pan said...

Hi Alex ,
pls give your commet on AEONCR

duran said...

Hi Alex,
Merry X'Mas and a Happy new year.What"s your view on KSL. Thank you

Alex Lu said...

Hi duran

Thanks for the warm wishes. KSL is in an uptrend. Its price movement takes the form of a loudhailer. The resistance is at RM1.84. If it can surpass that level, it may revisit its 2007 high of RM1.98-2.00. If it enters into a sharp correction, it may drop to its horizontal support levels at RM1.60 & RM1.50.

Alex Lu said...

Hi Pan

AEONCR is tradung within a band between RM3.40 & RM3.80. Its results for 9-month ended 20/11/2010 is commended. Based on the annualized results, AEONCR (at RM3.67) is now trading at a PE of 7.5 times (full-year EPS of 49 sen). At that price, AEONCR is deemed attractive.

MaxWealth88 said...

hi alex,

can you pls comment on the sunway/sunrise deal? any arbitrage opportunity buying sunway-warrant?


solomon said...

Good day Alex,

What is yr technical view on MAA? Merry Christmas and may God blessed u abundantly in new year.

Alex Lu said...

Hi solomon

MAA broke above its medium-term downtrend line at RM0.70-0.71 on Dec 17. Its strong immediate horizontal resistance is at RM0.85-0.90.

Alex Lu said...

Hi MaxWealth88

A amalgamation of 2 companies into a Newco & the swapping of shares of the existing companies for shares in the Newco seldom give rise to arbitrage opportunity. Avoid the temptation of buying the instruments of the existing companies because they are trading at below the Offer price. Since the Offer is substantially settled by Newco shares (with a small cash element), the Offer price is merely an exchange mechanism.

However, I am not saying that Sunway and/or Suncity are not good investment stocks. If they have dropped sufficiently, they are like any other property stocks and are thus worth investing in.

Ivan said...


Merry Xmas!

May the grace of Our Mighty Father be with you all during this eve of Christmas.

Have a blessed Christmas and a happy New Year. God Loves You.

cheer said...

Hi Alex,

Base on TA and news, do u think is time for glove next year ?

Ivan said...

Bro Alex,

Any idea on GenM now. It's broke up 3.54 and seem will break another resistence at 3.60. Right?

Looking at KLCI trend, it seem some sign of pullback. If pullback, will it bring any impact to Genm ?

What was Genm support annd resistence now. Please comment on TA.

Wondering will Newton casino project which will annouce early of March 2011, can help GenM or not.

CNY 2011 is coming. Will seasonal play; which send Genm go higher during CNY ?


Alex Lu said...

Hi Ivan

After breaking above the medium-term downtrend line at RM3.48, the stock seems to be a bit hesitant to go higher. However it did not break below the said downtrend line. From here, it may relaunch upward after a short rest. That's the idea but the stock seems to have a mind of its own. We will see how it will perform with the CNY just around the corner.