Jenting & Resorts

sopskysalat said...
Well Dali,What really make you so bearish about Genting? It may stand a really good chance of winning the IR in Sentosa. Yes, the investment is huge, but the news may be good to nudge it higher with Merril Lynch being one of the sole house to push the stock.

My Take: i was using the jenting thing as an example, but yes, i am also a bit bearish. i have rarely seen a stock that was bought up on potentially good news, to rise even further on actual good news, have you?? i think jenting did a fantastic job strategically, not with the sentosa thing but with the european takeover, that makes it a global player. the sentosa will be icing. however, the whole thing will burden the company with some debt. the excessive buying prior to actually getting sentosa will ensure mostly sellers should they get it, can u imagine if they do not get it. people should be happier that they got the european thing and not sentosa as the latter has a long drawn out payback, the other is immediate cashflow. i believe there would be a better entry price for jenting after the announcement of sentosa.

i am more bearish on resorts, i think the run up over the last 3 days is very very silly. where is the growth man.... its a dividend stock at best and the star cruise shit is about to hit the fan. ask them why they just borrowed so much money - if its to help finance jenting international should they be successful in getting sentosa, then very bad (ala old berjaya sport financing scheme); if its to rescue star cruise also bad... my recent blog on resorts:

Hence things look very rosy for Genting International, but not so good for Resorts World. Bearing in mind Resorts is basically the casino on the hill and the hotels, and the over-rated Star Cruises. Growth is constrained by population in malaysia and helped by the fact that it is the sole licensed casino. Resorts World has been hovering between RM11-12 for the longest time but many research analysts put the value of Resorts at RM15-17, only a smart minority pegs it closer to RM9-10. Why am I bearish on Resorts World:
1) Exposure to Malaysian gamblers, minus Malay community, the growth is limited.
2) Failure to recognise that the younger crowds do not like casino games that much.
3) Failure to recognise that casinos are competing for the same gaming dollar as football, horse racing and 4-D. Casino games are closer in characteristics to 4-D, while more gamblers prefer gambling with games that have more variables and/or inside information / edge in analysis / such as football or horse racing - Resorts is limited by that.
4) The Singapore IR projects, the Macau strip - you can bet the high rollers will avoid Resorts World.
5) The company's management still markets the company as a growth company, fergetaboutdit already. The company can save itself by presenting itself as a high dividend yielding company. Start by declaring a target dividend yield or setting aside of a high percentage of profits for dividends. Then you can get RM13-14 a share, futile to think it can go any higher.
6) The overhanging Star Cruises issue, a bit like Tanjong's German sheperd which has gone haywire.