Monday, October 19, 2009

GenM- what are we waiting for?

There have been a number of research reports touting the strong points for Genting Malaysia, such as its solid Balance Sheet with Cash reserves of RM5 billion and its attractive valuation as it trades only at PE multiple of 13 times. Technically speaking, we are all wanting for an upside breakout of its long-term downtrend line at RM2.90. If you want to be ahead of the curve, then buy when this stock pulled back to RM2.70-80 level. The fact that this stock still hasn't broken above its downtrend line is hard to fathom.

Chart 1: GenM's weekly chart as at Oct 19, 2009_11.00am(source: Quickcharts)


teh said...

Hi Alex,

Im facing a problem to make a decision about TA enterprise. Do you i should wait for dividend in specie or sell it before the ex-date. Tx for your comment..

kit said...

Dear Alex,

What about GentSp, has tested its strong resistance S$1.20 and support S$1.05 on few times. Mind to advise when the right price to go into this stock again? Thanks :)

Alex Lu said...

Hi Teh,

TA has a strong resistance at RM1.50. If that level can be surpassed than the next level is at RM1.70. Can it surpass the RM1.50 level? I won't know. You have to decide whether investors will still be excited about the prospect of TA & TA Global over the next 6-12 months and whether the value has been fully factored in. In the current environment, it looks like the probability of TA/TA Global going higher is fairly good.

Alex Lu said...

Hi Kit,

I am not in favor of Genting SP. Take a look at Genting Malaysia.

HoNG said...
This comment has been removed by the author.
HoNG said...

Hi Alex,

DO you know what happened to E&O?

Why suddenly drop so much? ANy bad news on it?

Alex Lu said...

Hi Hong,

E&O has gone ex the entitlement for Rights Issue of 1 ICSLS at RM0.65 for 2 shares of RM1.00 each held. The ICSLS can be converted into share on the basis of 1-to-1, with the difference of 35 sen being covered by the company's Share Premium account. This is a twist to the commonly practiced 2-call Rights Issue of share where the shareholders need only to pay for a portion of the cost, with the balance being covered by the company's Share Premium account.

I am not sure when the ICSLS can be converted to share but it must be noted that on the 2nd anniversary, the company has the option to trigger a mandatory conversion if the share price traded above RM1.00.

If one were to treat the ICSLS as share issued at RM0.65 each, then the theoretical ex-rights price for E&O share can be computed: [(2 x 1.44) + 0.65]/3 = 1.18. Some kind of adjustment in the share price is necessary & the market has done so by valuing the share ex-rights at 14 sen lower than cum-rights.