GENM: A Failed Upside Breakout (AMENDED)

Yesterday, we saw GENM rose 19 sen to close at RM4.70. In the process, GENM broke above the strong resistance from the horizontal line at RM4.60. This resistance has capped its upside for a period of 15 months. This morning, it started off with a mild correction which saw the prices pulling back to RM4.65-4.67. Unfortunately at 11:30am, the share prices dropped sharply to just below the breakout level at RM4.60. The selling intensified in the afternoon. At 2:55pm, it hit the low at RM4.47 before mild recovery set in. At 3:40pm, it was trading at RM4.51-4.52.


Chart 1: GENM's weekly chart as at Sep 22, 2014 (Source: Chartnexus)

Had the upside breakout sustained, GENM could continue to rise within its larger upward channels (see the green lines). This would see GENM slowly rising to the upper channel line at RM5.50-5.80.


Chart 2; GENM's monthly chart as at Sep 22, 2014 (Source: Chartnexus)

These are the potential reasons for the start of the next upleg for GENM:

1) Good financial performance

In last quarter (QE30/6/2016), GENM's net profit rose 195% q-o-q or 106% y-oy- to RM476 million while revenue rose 1% q-o-q or 13% y-o-y to RM2.234 billion. The q-o-q increase in net profit was due to foreign exchange gains of RM46.1 million; higher adjusted EBITDA by RM28.6 million from the leisure and hospitality business in US and Bahamas mainly contributed by lower operating loss from Bimini operations in 2Q 2016 and lower operating cost for RWNYC operations; and, higher adjusted EBITDA by RM20.6 million from leisure and hospitality business in Malaysia mainly contributed by higher revenue.


Table: GENM's last 8 quarterly results


Chart 3: GENM's last 41 quarterly results

2) Opening of a new theme park in Genting Highland

GENM is building a new theme park, the 20th Century Fox World Genting theme park in Genting Highland. The theme park is expected to be opened end of 2016. The theme will feature around 25 thrill rides and attractions based on films and franchises from popular movies and cartoons. 

Conclusion

As it stands, the failure of GENM to stay above the RM4.60 mark negates any call for a trading BUY for the stock following the upside breakout. However, the stock is worth tracking. If the next breakout can sustain, you should consider getting into GENM.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.