Genting Hong Kong Ltd : High Hopes for Philippines

Profile :-
• Genting HK was formerly known as Star Cruises Limited. The Company is a leading global leisure, entertainment and hospitality enterprise, with core competences in both land and sea-based businesses:
• Key brands are 1) Star Cruises - Asia-Pacific, 2) Norwegian Cruise Lines (“NCL”) - A 50% joint ownership alongside Apollo and TPG and 3) Resorts World Manila (“RWM”) - Manila, Philippines; joint partnership with Alliance Global Group under Travellers International Hotel Group, Inc.
 
Strong Interest in Genting HK
• CIMB hosted Genting Hong Kong Ltd (Genting HK) last Thursday for 2 sessions over lunch. The first session was for high net worth clients and the second session was for retail investors. Participants managed to learn more about Genting HK’s restructuring and future plans as well as the outlook for the gaming industry in the Philippines.
• How’s the response? As you can see from the pictures we took, interest in Genting HK was overwhelming. Interestingly, despite no lunch being provided, retail investor participation was strong and the Q&A session ended at 2.50pm. Amazing, considering that the retail session started at 1.30pm.

Watch RWM
• RWM is Genting HK’s first foray in a land-based attraction. RWM opened its doors to the public in August 2009, and is part of the premier leisure brand, “Resorts World”, representing a flagship integrated leisure and entertainment complex featuring 3 hotels including a six star all-suite Maxims Hotel, an iconic shopping mall, 4 high end cinemas and a multipurpose performing arts theatre.
• The land-based casino operations bear watching as lower operating cost in the Philippines and lower gaming tax could see faster payback for the investments in RWM.
• In addition to a captive local gaming population, RWM will also be able to attract players from South Korea, coastal China and Taiwan.

Interim Financials
• 1H10 turnaround with profit of US$11.3m versus FY09 loss of US$28.3m and 1H09 loss of US$35.3m.
• Annualised EPS is 0.32 US cts which translate into a P/E of 137.5x which is typical of companies staging a turnaround.
• Historical BVPS is US$0.27 or a historical P/BV of 1.6x.
• No interim DPS declared.

Profit Momentum Returning
FY 08  -   -101.1
1H FY09 - -35.3
2H FY09 - 7.0
1H FY10 - 11.3

Technical Analysis
• The stock broke out of its bullish flag pattern in July and has rallied about 123.6% of the previous run prior to the flag pattern. The stock should have more upside in the longer term, likely to test US$0.505, the 138.2%FR level.
• However, its RSI is showing a bearish divergence and already overbought, suggesting that a minor pullback is likely.
• Support is seen around the US$0.40 levels.
• If prices fall below US$0.37, it would mean that a deeper correction is taking place.