Genting Malaysia Berhad (GENM)

Date announced 25/11/2010
Quarter 30/09/2010 Qtr 3 FYE 31/12/2010

STOCK GENM (Resorts) C0DE  4715 

Price $ 3.38 Curr. ttm-PE 15.12 Curr. DY 2.16%
LFY Div 7.30 DPO ratio 31%
ROE 11.4% PBT Margin 34.6% PAT Margin 28.0%

Rec. qRev 1202916 q-q % chg -2% y-y% chq -10%
Rec qPbt 416262 q-q % chg 1% y-y% chq -12%
Rec. qEps 5.92 q-q % chg 10% y-y% chq -6%
ttm-Eps 22.35 q-q % chg -2% y-y% chq 120%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5% Avg.H PE 13.00 Avg. L PE 11.00
Forecast High Pr 3.71 Forecast Low Pr 2.49 Recent Severe Low Pr 2.49
Current price is at Upper 1/3 of valuation zone.

RISK: Upside 27% Downside 73%
One Year Appreciation Potential 2% Avg. yield 3%
Avg. Total Annual Potential Return (over next 5 years) 5%

CPE/SPE 1.26 P/NTA 1.72 NTA 1.96 SPE 12.00 Rational Pr 2.68



Decision:
Already Owned: Buy, Hold, Sell, Filed; Review (future acq): Filed; Discard: Filed.
Guide: Valuation zones - Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell.

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr


Stock Data: Recent Stock Performance:
Current Price (11/19/2010): 3.46
(Figures in Malaysian Ringgits)
1 Week -1.1% 13 Weeks -3.1%
4 Weeks 12.0% 52 Weeks 18.5%

Genting Malaysia Berhad Key Data:
Ticker: RESORTS Country: MALAYSIA
Exchanges: KUL Major Industry: Miscellaneous
Sub Industry: Hotel & Motel Chains

2009 Sales 4,991,700,000
(Year Ending Jan 2010).
Employees: 13,700
Currency: Malaysian Ringgits Market Cap: 20,447,107,522
Fiscal Yr Ends: December Shares Outstanding: 5,909,568,648
Share Type: Common Closely Held Shares: 2,670,000


Day's Range: 3.37 - 3.40
52wk Range: 2.46 - 3.72
Volume: 4,064,100
Avg Vol (3m): 8,538,920

A quick look at Genting Malaysia GENM (27.5.2010)

A quick look at Genting Malaysia GENM (27.5.2010)
http://spreadsheets.google.com/pub?key=t6p93zBmPtzub4oIFBVLGCg&output=html

Benjamin Graham's Checklist for GENM (28.5.2010)
http://spreadsheets.google.com/pub?key=tAN3tcyRLcCj8SFLWNuMeCA&output=html

A quick look at Genting Malaysia GENM (2.5.2010)

Genting Malaysia Berhad Company

Business Description:
Genting Malaysia Berhad Formerly known as Resorts World Berhad. The Group's principal activities are leisure and hospitality business which comprises hotel, gaming, cruise and cruise related operations, entertainment businesses, golf resorts, tours and travel related services and other support services. Other activities include property development and management provision of training, offshore financing, utilities and cable car management services, proprietary timeshare ownership scheme, selling and letting of apartment and investment holding. The Group operates in Malaysia and Asia Pacific.

Wright Quality Rating: AAA1 Rating Explanations







A quick look at GENM (2.5.2010)
http://spreadsheets.google.com/pub?key=tp5o0Wh0t3M0rC_NfN1I6Ag&output=html

Comment:
GENM is a great company by my criteria.  GENM earned MR 1.32 billion and paid 'miserable' dividend of MR 300 million last year.  It carries cash equivalent to MR 5.25 billion.  To date the management has not proven itself to be able to employ this cash productively in the new ventures they had undertaken in recent years.  Why not return this cash to the shareholders?  Let's look at what Buffett wrote on GREAT companies.

The Three Gs of Buffett: Great, Good and Gruesome

Here are some golden words from Buffett.


1.  On 'Great' businesses, Buffett says, "Long-term competitive advantage in a stable industry is what we seek in a business.

• If that comes with rapid organic growth, great. 
• But even without organic growth, such a business is rewarding. 
• We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere. 
• There's no rule that you have to invest money where you've earned it. 
• Indeed, it's often a mistake to do so: Truly great businesses, earning huge returns on tangible assets, can't for any extended period reinvest a large portion of their earnings internally at high rates of return."

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OSK Research: Genting Malaysia to trade sideways
Written by OSK Research
Friday, 30 April 2010 10:07




KUALA LUMPUR: OSK Research says Genting Malaysia’s shares, which were actively traded on Thursday, April 29, could continue trending sideways.


The research house said on Friday, April 30 that the stock has been trending sideways for many months and a trading range has been detected. It is ranging from the RM2.68 level to the RM3.00 level.


"That means the stock is expected to until one of these two levels is violated. In other words, yesterday’s active trading in the stock’s shares does not signal anything significant," it said.


OSK Research said the stock’s longer-term outlook will remain a sideways bias until it has violated one of these two critical levels.


Within the trading band, look for an immediate support at the RM2.75 level and an initial resistance at the RM2.88 level

From: The Edge Malaysia

A quick look at GENM (Genting Malaysia)

Genting Malaysia Berhad Company

Business Description:
Genting Malaysia Berhad Formerly known as Resorts World Berhad. The Group's principal activities are leisure and hospitality business which comprises hotel, gaming, cruise and cruise related operations, entertainment businesses, golf resorts, tours and travel related services and other support services. Other activities include property development and management provision of training, offshore financing, utilities and cable car management services, proprietary timeshare ownership scheme, selling and letting of apartment and investment holding. The Group operates in Malaysia and Asia Pacific.
Wright Quality Rating: AAA1 Rating Explanations







A quick look at GENM
http://spreadsheets.google.com/pub?key=tBTCgSu7ESHENiACNLUujkg&output=html

AAA1 Wright Quality Rating.  With this company generating so much FCF and a lack-lustre DPO of 22.6%,  the growth of GENM is rather anaemic the last few years.  It is hoarding cash to the tune of RM 0.92 per share.  At RM 2.79, its PE is 12 and DY is 1.88%.

Also read:

Cash Hoard – Boon Or Bane For Shareholders

Cash Hoard – Boon Or Bane For Shareholders

EDUCATION | 16 MARCH 2010

Cash Hoard – Boon Or Bane For Shareholders

By Ernest Lim 

Imagine if you have S$100m in your bank account, what joys and problems would you face? I believe some of the joys would entail sacking your boss, living it extravagantly but problems would include the deployment of cash, as well as, fearing for your life if people are aware of your immense wealth.

If the above situation happens to companies with large cash holdings, the management would also face similar problems, especially on the issue of effective cash deployment. So for companies with a large cash hoard, is it a boon or a bane? Let’s delve into the pros and cons of maintaining a substantial cash hoard.

Advantages

Reflective of a company with strong business performance

One of the advantages is that a large cash hoard signals that the company seems to accumulate cash faster than it can deploy (assuming that the company is effectively deploying its cash but it is still accumulating).

Furthermore, it is also reflective of a good business performance as cash is derived from profitable operations.

Buffer against bad times

Cash can be used as a buffer against bad times or mistimed acquisitions. For example, during the recession in 2008/09, companies with large amounts of debt and little cash face refinancing difficulties and some even have problems paying off the loans when they are due. Ferrochina, ex Singapore listed firm in the manufacturing sector, is a case in point.

Moreover, cash serves as a safety net against unpredictable events. Companies which carry out acquisitions, joint ventures, or maiden expansions into new markets or geographies are likely to face their fair share of failures and difficulties. Some business ventures may not reach their desired results and may run into temporary losses. Cash can be used to cover the losses in such situations.

Business facilitator

Companies with cash holdings are also likely to be able to get favourable credit terms with suppliers and banks. This is apparent as suppliers and banks have to access the credit risk of the companies which they are doing business with and companies with a considerable amount of cash holdings would allay part of their credit concerns. This would aid in the business operations of the companies.

Flexibility for future growth

Cash also provides management with a myriad of options for future growth. For example, management can decide on the following options

• Look out for attractive acquisition targets either to expand horizontally or vertically along the value chain.

• Carry out capital expenditure such as to acquire land for future purpose, or expand their production capacity through buying more machines etc.

• Invest in listed companies purely for investment purposes.

Disadvantages

Dearth of attractive investment opportunities

One of the most obvious reasons for a large cash hoard is that management has exhausted attractive investment opportunities at the moment and is keeping cash for future opportunities whenever that may be. This does not benefit shareholders as holding substantial cash incurs an opportunity cost and also drag down the return generated by the companies. Besides, shareholders prefer companies to return cash or carry out share buybacks if there are no attractive investment opportunities by the companies.

Lack of long term planning

Some companies may not have the practice of planning for the long term. Thus, as they do not have a concrete idea of their cash requirements over the next three to five years, they would prefer to hold cash as this provide them with flexibility. Nonetheless, it is generally non ideal to invest in companies which do not execute long term planning, as “failure to plan means planning to fail”.

Agency costs

With substantial cash in the companies’ coffers, management may be tempted to use these funds to build their own empire by spending on non synergistic acquisitions and loss making projects, so as to boost their power, reputation and prestige.

Possibility of incurring suspicion and indignation from shareholders

If the cash hoard is increasing and management does not have concrete plans on the use of such funds, this may incur the suspicion on the authenticity of actual cash owned by the companies. For example, Oriental Century, a Singapore listed firm in the education sector, has a large amount of cash in its books. However, it is subsequently revealed that its Chief Executive Officer has allegedly inflated the cash holdings.

Another company, China Hongxing, a Singapore listed firm in the sports shoe and apparel sector, has been incurring the indignation of shareholders for more than a year by sitting on a large cash hoard, amounting to RMB3b at Dec 09, up from RMB1.9b at Dec 08. The collapse in its share price from the high of S$1.45 in Oct 07 to a low of S$0.055 in Mar 09 was due in part to investors’ angst and displeasure in China Hongxing management of cash. However, China Hongxing management has recently unveiled plans on how it would be deploying its cash.

Conclusion – evaluate against the overall context

To determine whether having a large cash hoard is beneficial to shareholders, shareholders have to evaluate against the following criteria:

• Companies’ existing and future incoming cash flows;

• Companies existing and future cash flow requirements (i.e. outflows);

• Stage of business cycles;

• Existing loan and interest repayments.

Thus, if the companies have concise plans to deploy their cash, either to satisfy outstanding loan repayments, or for synergistic acquisition purposes, or for capital expenditure in view of the recovery in the business cycles, then the cash hoard is a boon as it creates shareholder value.

Conversely, if management has no concrete plans to deploy the cash or to deploy them in reckless fashion, then, the cash hoard is a bane as it destroys shareholder value.

Once again, investors have to put on their thinking hats and do some work to reach a decision on whether the cash hoard is a boon or a bane for shareholders.

Ernest Lim currently works as an assistant treasury and investment manager. Prior to this role, he was with Legacy Capital Group Pte Ltd, a boutique asset management and private equity firm, as an investment manager since 2006. He received a Bachelor of Accountancy (Honours) from Nanyang Technological University in 2005. He is a Chartered Financial Analyst, as well as, a Certified Public Accountant Singapore. He is currently taking a short break before embarking on a new role.

http://www.sharesinv.com/articles/2010/03/16/cash-hoard-boon-bane-sharesholders/

Resorts World buys US$18m of MGM’s secured notes (9% Coupon Rate & due in 2020)

Resorts World buys US$18m of MGM’s secured notes

Published: 2010/03/18

GENTING Malaysia Bhd’s wholly-owned unit Resorts World Ltd has subscribed to US$18 million (US$1 = RM3.30) of MGM Mirage Inc’s (MGM) 9 per cent senior secured notes that are due in 2020. 

In its filing to the stock exchange yesterday, Genting said the notes were part of MGM’s fund raising effort totalling US$845 million to repay debt.

The 9 per cent coupon rate generates better return than what is now attainable in the money markets or in other secured investments regionally.


http://www.btimes.com.my/Current_News/BTIMES/articles/20100318005103/Article/index_html

Resorts World Bhd

Business Summary

Resorts World Bhd engages in tourist resort business in Malaysia. It offers various leisure and hospitality services, which comprise gaming, hotel, entertainment, and amusement. The company's activities also include land and property development; time share ownership; renting of its apartment and part of its leasehold land; sale and letting of completed apartment units, and land and property; ownership and operation of aircrafts; the condotel, hotel, karaoke, leisure and entertainment, and show agent businesses; and golf resort and property development. In addition, it provides tours and travel related, training, property upkeep, cable car and electricity supply, offshore captive insurance, and water services. The company is based in Kuala Lumpur, Malaysia.

Fundamentals
* in millions
Company Basics
Exchange
Bursa Malaysia
Company Name
Resorts World Bhd
Stock Code
4715
Sectors
Consumer Discretionary
Paid Up Capital *
MYR 590.20
Par Value
- (as at 2008-12-31)
Market Cap *
MYR 16,643.50 (based on value of 2.8200 per share)

Performance (as at 2008-12-31) *

Total Assets:
MYR 9,422.90
Intangible Assets:
MYR 94.40
Revenue:
MYR 4,886.70
Earnings Before Interest and Taxes:
MYR 1,754.30
EPS (Basic) Inc. Extraordinary Items:
MYR 0.11
PE Inc. Extraordinary Items:
25.49
EPS (Basic) Exc. Extraordinary Items:
MYR 0.11
PE Exc. Extraordinary Items:
25.49
Net Income:
MYR 634.40 (2007: 1555m)
Dividends - Common/Ordinary:
MYR 299.45
Dividends - Total:
MYR 299.45
Goodwill:
-
Minority Interest:
MYR 7.30
Reserves:
-
Return On Assets:
6.73%
Return On Equity:
7.63% (2007: 18.97%)
Shareholder's Equity:
MYR 8,317.80

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Historical 5 Yr PE 12.1 to 18.4 (EY 8.26% to 5.44%)
Historical 10 Yr PE 12.6 to 22.9 (EY 7.94% to 4.37%)
Present PE based on MR2.82 = 25.49
Earnings Yield = 3.92%
DY = 1.8% (MYR 299.45/MYR 16,643.50 )
ROTC = 634.40/( OE 8691.09 + LTL 90.56 + STL 0) = 7.22% (2007: 18.90%)

Between the end of 1998 and the end of 2007:

• total earnings were $1.177 a share,
• total dividends were $0.283 a share and
• retained earnings were $0.894 per share ($1.177 - $0.283) to add to its equity base.
• the company's per share earnings increased from 8.9c a share to 19.2c, the difference was 10.3c a share.
• return on retained capital/earnings RORC was 10.3/89.4 = 11.52%