Genting Singapore, touted as a recovery play, trades near eight-month low price! (5 Aug 23)

August 5, 2023 el15

Dear all

Recently, Genting Singapore, a supposedly recovery play, closed at a near eight-month low price. It caught my attention especially after Las Vegas Sands (LVS) reported results on 19 Jul 2023. LVS reported a good set of results and indicated that there is scope for further improvement, as China tourists have not come back in full force yet. While the details (such as VIP volume growth and win percentage) may differ markedly from LVS (i.e., Marina Bay Sands) and Genting Singapore, generally speaking, the good set of results in MBS increases the chance that Genting Singapore may report similar set of results (at least in the right direction).

However, notwithstanding the general uptrend in LVS and Macau gaming stocks such as Sands China, Galaxy Entertainment, Wynn Macau and MGM China, Genting Singapore seems to be on a downtrend. However, it is encouraging that Genting Singapore has formed a potential bullish reversal hammer on 4 Aug. In addition, Genting Singapore’s position as the only alternative casino in Singapore leading to a likely eventual tourism recovery play, backed by net cash per share of $0.27 (approximately 29% of its market capitalisation) further piques my interest.

Why Genting Singapore catches my attention

a) Analysts are generally positive with average target price $1.14

Based on Figure 1 below, 20 analysts cover Genting Singapore with 10 buys and 10 holds. Average analyst target price is around $1.14. Coupled with the estimated dividend yield of around 4.0%, total potential return is approximately 28% if the consensus is right.

CGS-CIMB Securities, in their 19 Jul 2023 report, wrote that besides DBS, Comfort Delgro, Yangzijiang Shipbuilding, investors can consider buying Genting Singapore ahead of results. It also cited that investors can consider capitalising on recent share price weakness to accumulate Genting Singapore as it is a beneficiary on the recovery of Chinese tourists into Singapore. CGS CIMB postulates that a potential share price catalyst can come from positive comments from Genting Singapore’s management during the upcoming results.

Figure 1: Average analyst target price $1.14; total potential upside 28%!

Source: Bloomberg 4 Aug 23

b) Chart – tentative bullish reversal hammer appears!

Yesterday morning, Genting Singapore seems to have staged a bearish break below its trading range $0.920 – 0.950. Day range was $0.900 – 0.930. However, it closed at $0.920, well off the lows. Volume generated was a hefty 54.3m shares, the highest since 13 Jul 2023. This volume was also significantly above its 30-day average volume 27.1m shares. Based on candle stick formation and volume pattern, Genting Singapore seems to have experienced a selling climax with a potential bullish reversal hammer amid strong volume. (click HERE for the elaboration on selling climax). For this bullish reversal hammer formation to be valid, Genting Singapore should see some positive follow through in share price in the next couple of days,. Most indicators which I follow, such as MACD, MFI and RSI with the exception of OBV are showing bullish positive divergences.

On the flip side, it is noteworthy that a sustained downside break below $0.920 with volume expansion points to an eventual technical measured target of around $0.890. This coincides with its Fibonacci and historical support region too, which are around $0.890 – 0.900.

Near term supports: $0.920 / 0.900 / 0.890

Near term resistances: $0.950 / 0.965 / 0.980

Chart 1: Potential bullish reversal hammer appears!

Source: InvestingNote 4 Aug 23

c) Muted expectations

Personally, I believe market expectations are not high for Genting Singapore heading into 2QFY23F results. This can be observed on three fronts.

Firstly, Genting Singapore has fallen approximately 23% from an intraday high of $1.19 on 4 Apr to close $0.920 yesterday. At $0.920, this is the lowest close since 14 Dec 2022 which is almost an eight-month low price and before its announcement of its 4QFY22 results.

Secondly, I suspect market is pricing in “a not super stellar 2Q” for Genting Singapore, as it is common knowledge that China tourists have not come back in droves yet at least in the past few months. Notwithstanding this, anecdotal evidence seems to indicate this trend is likely to improve from 2HFY23F onwards. Furthermore, based on CGS CIMB report, China has risen to become the top 3 source of tourists in Singapore for the month of June, up from top 10 in the first five months of 2023.

Thirdly, Genting Singapore has disappointed the market after it announced 1QFY23 results in May and this was swiftly accompanied with an almost 7% slump in its share price immediately after its 1QFY23 results. Thus, I believe there may be some concern and wariness on Genting Singapore as we head to its 2QFY23F results, slated for release on 10 Aug Thurs after-market hours.

All in, suffice to say that not much expectations have been priced in for its 2Q results especially after it has disappointed on 1Q. If Genting Singapore’s management can voice optimism in 2H, this may serve as a potential positive share price catalyst.

d) Valuations are attractive

Genting Singapore’s valuations seem attractive. Based on Bloomberg, it trades at 18.8x FY23F PE and 15.3x FY24F PE. FY23F and FY24F dividend yields are at 4.0% and 4.5% respectively. Based on a UOB Kayhian report dated 15 May 2023 (click HERE), Genting Singapore sits on a net cash per share amounting to $0.270 which comprises approximately 29% of its market capitalisation.

Risks

The below list of risks is not exhaustive. These are just some pertinent risks which comes to my mind. It is advisable to refer to Genting Singapore’s analyst reports (Click HERE) for a complete appreciation of risks involved in trading / investing in Genting Singapore.

a) Buying ahead of results is risky

Similar to my other write-ups, this is a standard risk. Buying ahead of results is risky. Even if company reports better than expected results and guidance, there is no guarantee that the share price will definitely move higher. However, if company reports poorer than expected results and guidance, odds are extremely high that the price may weaken post results. Case in point is Genting Singapore’s 7% drop in its share price immediately after its disappointing 1QFY23 results.

b) Chart requires follow through buying as confirmation

The potential bullish reversal hammer formation still requires follow through buying in the form of a gap up, or large white candle as confirmation of a potential reversal trend. Before this happens, depending on one’s risk profile and assessment, it may be premature to buy.

In addition, it is noteworthy that a downside break of its trading range $0.920 – 0.950 points to an eventual technical measured target of around $0.890.

c) Large volume sell offs may be a result of a change in positioning by the institutions

Volume has picked up amid the slide in Genting Singapore’s share price. Two out of the past three days have seen above 30-day average volume of shares changed hands. Such large volume transactions may be a result of a change in positioning by the institutions. If this is really the case, we do not know how many shares they are prepared to sell at current eight-month low prices.

d) May have other reasons which caused this fall

There may be reasons known to some people in the market but unknown to me which cause the decline in Genting Singapore’s share price.

e) Risk of catching a falling knife

Notwithstanding the above potential positive interesting points, it is entirely possible that stocks can always go lower. This is why some market watchers advise against catching a stock which is falling. Catching a stock which is free-falling is especially dangerous for small mid cap stocks. Furthermore, selling ahead of results sometimes is an ominous sign and does not boost investors’ confidence.

Personally, for large cap stocks, the above risk may be mitigated to some extent, as it is usually widely covered by analysts and there should theoretically be fewer blind spots. Nevertheless, I hasten to add that this depends on one’s strategy and risk profile.

Based on my pure personal observation of price action and chart, Genting Singapore should see good near-term support around $0.890 – 0.900.

f) Volatile share price especially around results period

Based on past pure observation, Genting Singapore does react to a large extent on results. It reported 1QFY23 results on 12 May 2023, after market hours. It dropped $0.08 or approximately 7% on the day (15 May) post results.

Conclusion

It is noteworthy that there are risks involved such as the aforementioned risks such as event risk stemming from upcoming 2QFY23F results; risk of catching a falling knife etc. Nevertheless, Genting Singapore trading at eight-month low price; backed by net cash per share $0.270 (comprising of 29% of its market capitalisation), and likely to be an eventual beneficiary of a tourism play supported by 4.0% FY23F estimated dividend yield, I reckon that I am comfortable to take some risks in accumulating Genting Singapore for a trading play.

Genting Singapore is going to report results on 10 Aug Thurs after-market hours. Let’s see how it goes.

For a more complete picture, it is advisable to refer to Genting Singapore’s analyst reports (Click HERE) and SGX website (Click HERE).

Readers have to assess their own % invested, risk profile, investment horizon and make your own informed decisions. Everybody is different hence you need to understand and assess yourself. The above is for general information only. For specific advice catering to your specific situation, do consult your financial advisor or banker for more information

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P.S: I am just vested in Genting Singapore and have informed my clients yesterday.

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