Saturday, June 11, 2016

Journey To Retirement Part 1.2 -- Genting SP

2016 is the 10th year that I have vested in Genting SP share.  Bought into it in April 2006 after knowing that Singapore was going to build 2 IRs then and Genting SP was one of the company going to bid for one of the IR.  This will be the 2nd longest stock I have ever hold in investment with SingTel being the longest after holding for 14 years from start of IPO in 1993 to 2007.

I was pretty confident that Genting SP will be involved in one of the IRs back in 2006 after the Government decision on building 2 IRs.  The IR concept back then was pretty new unlike the tradition casinos in Macau or Malaysia or other part of the world.  Then somewhere in October 2006 when Genting SP submitted its proposal for the Sentosa IR with the inclusion of a Universal Studio Theme park, the S.E.A Aquarium and other attractions, the possibility of them winning the bid rose (from my perspective) as the family theme just blended well with Sentosa compared with concepts from other consortium bidding for the IR.  While the selling point then was the impact the 2 IRs could bring to the growth of Singapore economy (from construction to operation phase benefiting companies and jobs creation, etc), that wasn't the main reason for my investment in Genting SP.  I am not overly optimistic on the positive impact on the IRs on Singapore economic growth.  Any business will come to a saturation stage of growth thereby putting an upper limit to the nation growth.  The positive impulse initially will eventually tone down and that is why we have been seeing revenue and profit of Genting SP slowing down these days.  Furthermore, the latest news of retrenching 400 staffs just enforced my believe.  However, from Genting SP perspective it will be different as when the Singapore operation reaches saturation phase, they could venture overseas to seek another level of growth like the South Korea Jeju Island IR which will be scheduled to be operation in 2017.  Simply put it I am investing in the company and not Singapore economy.  That is the main reason for my investment in Genting SP.

My holding price as of now is $0.5314 after going through 2 right issues at price of $0.80 and $0.60 coupled with my initial purchase price of $0.38.  As of closing price of $0.74 on 10th Jun 2016, this translates to unrealized profit of 38.68% and a dividend return of 10.35%.  Some might wonder why I did not divest in 2010 when price shot to an all time high of $2.35 in November 2010 and that would give me a realized profit of at least 342% in just 4 years.  That looks like a mistake but I am not regretting that as I simply following my investment plan.  My expectation of Genting SP is to see it enters the growth saturation phase for its Singapore IR then venturing overseas to seek second or third level of growth.  The South Korea Jeju Island IR is definitely the second growth stage.  I have to correct the earlier write up citing that Japan IR (if possible) is the second growth stage as then I have under-estimated the potential of the Jeju Island IR.  Jeju Island if you have noticed is one of the well sought after attraction in North Asia region given its nature appeal and not to mention a popular shooting venue for K-Drama.  Moreover, if one do a search can find that property prices in Jeju Island has shot up in the past years mainly due to those Chinese investors snapping up the properties over there.  As such, I have to reclassified my expectation of Genting SP to Jeju Island IR as the second growth stage and Japan IR (if it happens) will be the third growth stage.  My journey in investment in Genting SP will end at the third stage (if can go that far) and will divest once the third stage of growth enters saturation stage.

The price of Genting SP has been ranging between $0.70 to $0.90 for past months already and I believed that reflect the lower bound of valuation of the saturation phase of the Singapore operation.  Based on Singapore operation alone, the price should not be able to move back to the $2 level and probably capping at between $1.20 to $1.50 (for very positive earning).  The near term catalysts should be the opening of the Jeju Island IR next year.

It will not be surprised the investment in Genting SP could easily overtake SingTel as the longest investment (just 4 more years to go) taking into consideration of seeing the initial phase of Jeju Island IR and then going into saturation phase (that should be a 5-years period).  The investment journey could even go further if Japan finally legalizes gambling, building IRs and Genting SP becoming one of the player there.

While I might not have reap in a big profit from investment of Genting SP, I am satisfied that everything happened went according to my investment plan.

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