Sunday, April 21, 2019

Journey To Retirement Part 1.4 -- Genting SP

Singapore Government announced on 3rd Apr 2019 the plan to expand the 2 IRs (Resort World Sentosa and Marina Bay Sands) with the requirement that the 2 IRs operators pumping in a total of S$9 billion (S$4.5 billion each) for the expansion.  Nothing surprising with that given that Singapore is already 1 foot into the IR or gaming industry and with the upcoming regional competition in particular the Japan IR, it is just a plain common sense one need to upgrade or expand.  It is only the pseudo-elite who probably possess not much of a common sense call it an imagination regarding the expansion.

Japan IR (suppose to have 3 of them) will create a casino gaming market just behind Macau in the world in term of revenue and that is some threat Singapore can't ignore about it.  Thus, the idea of expansion to the 2 IRs should not be something just recently and probably having that thoughts for the past few years when Japan first announced of the IR plan.  With the Japanese Government expecting to commence bidding process for the IR in 2H19, it should be strategically wiser for Singapore to wait till the outcome of the Japanese IR then announce the detail of the expansion.  Now, with the detail being announced, we are giving the Japanese the opportunity to demand an even higher quality of their IR.  Well, you don't suppose the Japanese Government will lower their IR quality to give Singapore IR a share of the pie do you ?

With the expansion being planned, as an investor of Genting Singapore, this is something to consider, the possible risks and rewards going forward.  Don't just buy into the surface that the expansion shall be good for Genting Singapore in the long run like what most analysts are saying.

Genting Singapore cash and cash equivalence for FY18 as stated was about S$4.2 billion.  To spend S$4.5 billion for RWS expansion (refer here for detail of expansion) and to factor in a possible win for the Japan IR, it should be a commitment of at least S$10 billion in total.  There is no doubt Genting Singapore will require to take up syndicate loan or even doing cash call from investors for that kind of commitment.  Debt level will increase and probably investors won't be seeing increase in dividend payout going forward.  This is some kind of risk any Genting Singapore investor should be expected of.

To win or fail to the Japan IR itself already pose a big difference in risks and rewards to Genting Singappore and now to put in RWS expansion into the equation could make the risks and rewards even more complicated.  This is something investors should not be taken lightly.

Winning Japan IR
This probably the one outcome which every investors wanted.  Prior to the RWS expansion, the risks and  rewards are pretty straight forward.  Genting Singapore divested Jeju IR in 2016 and in the process build up the war chest for the Japan IR bid.  With a cash and cash equivalent of S$4.2 billion as of FY2018, it should not require to take up a larger size of syndicate loan plus tapping into investors to raise fund as compared to now having to put aside S$4.5 billion for RWS expansion.  Without the RWS expansion, both the revenue from RWS and Japan IR could be used to recover what is being put in at the Japan IR at a faster rate.  Now, with the RWS expansion, it need to recover on both front the capital injected to it.

If I'm not wrong, neither Genting Singapore nor Singapore Government has provided any guidance, expectation or target for the post-expansion RWS.  This is something of a concern either for Genting Singapore as well as Singapore economy.  You can't inject capital without any expectation/target or just get rewarded with a small percentage increase in revenue right ?  If so, this is considered as strategically failure.   The main concern now is how long and through what channels can Genting Singapore earn back what is being injected into RWS expansion plus Japan IR.

Not Winning Japan IR
This will be a disastrous outcome for Genting Singapore without any doubts and probably you will see investors including funds start selling off shares in Genting Singapore.  With and without RWS expansion can also lead to different level of risks for this scenario.  Without the RWS expansion and failing to win the Japan IR could lead Genting Singapore to use its cash pile to hunt for overseas acquisition to boost its growth.  It is not the most beautiful outcome but still not the worst.  However, with the RWS expansion, cash pile already committed and overseas acquisition might not be an easy option without having to take additional debt.  To make thing even more complicated is the uncertainty of RWS post-expansion revenue when compete against the newly Japan IR (not 1 but 3).

These are the uncertainties as a Genting Singapore investor will be facing going forward.  That definitely increases the risks and rewards.  At the same time, it also raise the probability of prompt actions that should be taken in order to protect one's investment in Genting Singapore.  What investors hope for now is for Genting Singapore to win one of the three Japan IR and that could simplify the situation cause by the RWS expansion plan.

In STI Analysis -- the next peak and trough ? (40) dated 2nd Mar 2019, I posted a Minor degree Elliott Wave analysis of Genting Singapore reproducing as followed

In that analysis I have purposely blanked off the corrective level as the data is too sensitive to avoid other taking advantage and profit from it.  In one of those blanked off entry is a price level of $0.96 which Genting Singapore is trading now.  Something that was analyzed months ago and is happening now.  I have a full picture of the Elliott Wave data being generated from SuperCycle down to Cycle, Primary, Intermediate and Minor degrees with all the data I have from the chart.  So far, what I can say is the share price of Genting Singapore is one of those few that following Elliott Wave closely.  As such, this has given me an additional protection in my investment.  So in time when the fundamental and valuation have become blurry due to the complication of RWS expansion and Japan IR, this is something I could fall back on in protecting my investment.  Of course by common sense and not imagination (since I'm not a pseudo-elite unlike some), that "ace" I have to keep close to my chests.  That is what strategy is about.