Today, I add a new category to my posts, titled Company View to let you know what I think of a particular company. Under these headings I will focus more on the fundamental aspects of the counter.
But unfortunately I am travelling today so I don’t have access to my charts, but here it is anyway:
Genting is another one of Malaysia’s top companies, IMO and is up there with the likes of Topglov and Digi, but for different reasons. I am not convinced that it is particularly well managed nor does it have a competitive edge over its competitors (which are MGM Mirage, Harrah’s, Sands) . But its biggest advantage is that the industry has extremely high barriers to entry, and globally it is dominated by fewer companies than in most other industries. And Genting is definitely up there. Its revenues are around USD1 billion a year compared to around USD7 billion for the world’s largest operator, MGM. Also the gaming industry is exploding, especially in Asia. Despite the negative publicity surrounding gambling, especially online, this industry will never evolve and will never go away. Genting also runs power plants – another area with high barriers to entry and is a cash cow. This diversified income stream makes it very popular with research analysts, who have contributed to its skyrocketing prices from MYR$8 to MYR$24 in 6 years.
This year alone Genting has been busily acquiring companies like Landmark back home, and more recently Stanley Leisure in the UK (which also has a growing industry due to greater deregulation). It is also one of the few bidders in Singapore’s new integrated resorts. Research analysts love this counter too, which has skyrocketed from MYR$8 to MYR$24 in 6 years (you can see some of their reports and get some background on this company and its competitors here).
Okay but what are its downsides? Here they are:
- Losses from Star Cruises.
- Failure to participate in the Macau casino scene
- Competition (Genting isn’t the only player getting in on the Asian scene. Its stock price reflects fears that it may be vulnerable in the face of competition because it doesn’t have a record in this area. It may also lose out in the Singapore IT bid).
I’ll leave the analysts to tell you whether it is fairly, under or under valued, but this is a counter on my watchlist which I would love to buy on weakness.
