Kbunai & PtgTin- riding on a dream

There is a story in Malaysian Insiders that Karambunai Corp Bhd ('Kbunai') may be involved in the development of a 500-acre “eco-nature” resort in Sabah which has the option to build a casino alongside a mangrove centre, water theme park and waterfront properties. For more, go here.

That report generated great excitement for Kbunai & Petaling Tin Bhd [PtgTin] (both controlled by Dr Chen Lip Keong). Both Kbunai & PtgTin own big tracts of land in Menggatal, Kota Kinabalu where the 6-star Nexus Karambunai Resorts is located.

I has serious doubt about the chances of the proposed casino taking off in view of the following:

1) The political situation in Sabah may not be conducive to a project that might anger the general population, whether Muslims or Christians. Two years ago, Sabah's Chief Minister Datuk Seri Musa Aman stopped the construction of a giant statute of Kuan Yin in the state because it might anger the Muslims within the vicinity. This caused a bitter spate with the then Deputy Chief Minister Tan Sri Chong Kah Kiat, the leader of another component parties of Barisan Nasional who later resigned from the state government (here). Can the same Chief Minister allow a casino to be built in the State? Some may recall that a few months ago, a few state assemblymen actually proposed the construction of a casino in the Sabah but the idea was shot down by the State Tourism, Culture and Environment Minister Datuk Masidi Manjun (here).

2) A casino is now a dime a dozen. Unlike 20 years ago, you can find casinos all over the region. While many investors are enamored about the spectacular performance of Genting Singapore, they forget that there are many casinos that are struggling to stay afloat. To succeed, the casino must have sufficient local population with wealth. If not, you would be relying on overseas gamblers. In such a situation, the chance of the casino making money is not good. Sabah does not have a large population with wealth to sustain a casino.

Based on the above, I would rate the chance of Kbunai's developing a casino as unlikely.

Technical View

Looking at the monthly chart of Kbunai (plotted on log scale), we see that the stock has broken above the accelerated downtrend line at RM0.12 & tested the strong horizontal resistance at RM0.20. If the stock can break above the RM0.20 horizontal resistance, it may test the long-term downtrend line at RM0.30. However, if profit-taking were to set in over the next few days, the stock may drop back to the horizontal support at RM0.10-12, which is the breakout level of the accelerated downtrend line.


Chart 1: Kbunai's monthly chart as at Sept 1, 2010_plotted on log scale (Source: Tradesignum)

From the monthly chart of PtgTin (plotted on log scale), we can see the long-term downtrend line is at RM0.20. The stock broke above that downtrend line on Friday but dropped back towards the breakout level at the close. Can it hold onto this breakout level over the next few days & weather the profit-taking activities?


Chart 2: PtgTin's monthly chart as at Sept 1, 2010_plotted on log scale (Source: Tradesignum)

Comment/Conclusion

In view of the political & economic factors, I believe that the casino proposal is unlikely to take off. Based on this, I think that one should be very careful trading in these two stocks. If you choose to rely on technical analysis for your trade, be sure to stick to the technical rules. Set protective stops & stick to them.