Tuesday, February 15, 2011

Genting Berhad vs Genting Singapore

Singapore gaming stocks (Genting and Las Vegas Sands("LVS")) have been the darling of the stock market for a while now.

Over last 9 months, price for LVS has pulled away from their other 2 competitors, i.e. MGM and Wynns. When I was contemplating, price for LVS was hovering around USD16-17. Now it is priced at USD47 a share, a staggering 176% over 9 months, mostly to do with the success of the Singapore casino. Genting Singapore (GenS) is almost similar, its price has upped from SGD1.00 to now around SGD2. Genting Berhad which owns 51.7% of GenS has increased from RM6.70 to now more than RM10.20 an increase of more than 50%. Now the question is whether Genting is still a buyable stock? If yes, should we be buying Genting Berhad or GenS.

Now let us look at GenS and its pros and cons:
  1. Direct exposure to Singapore gaming industry, Singapore government has proven to be a successful country in whatever they attempt to do;
  2. Not fully completed yet, hence it is presumed with its completion it may be gaining more in profitablity;
  3. By selling its UK casino business to Genting Malaysia, its balance sheet is now much healthier;
  4. In fact its balance sheet is much healthier than its direct competitor and foe i.e. LVS;
  5. cheaper than LVS, MGM and Wynn - the other big 3 gaming companies which have exposure in different markets.
  1. Already quite highly priced, at 20x PE;
  2. More expensive than Genting Berhad;
  3. Single exposure to a single market, hence volatility in terms of performance can be very high, very much follows the economy of Singapore where for one quarter can register more than double digit growth and another can have deficit.
What about Genting Berhad, I for one have more preference over Genting Berhad due to the following reasons:
  1. a cheaper entry than GenS, priced at around 17x-18x PE with potential for growth as well;
  2. Genting Berhad which owns GenS, Genting Malaysia, plantation, power plant and properties has more of a hedge than GenS. At the same time, they do enjoy the ride of success from the Singapore gaming sector;
  3. propensity of a higher dividend from Genting Berhad is better due to its balance sheet healthier;
  4. as a Malaysian I do not need to change to a different currency when buying Genting's stock;
  5. while I may not like saying this, it is better hedged from the management doing stupid things (or rather unfavorable things to minorities) like moving the Genting UK business from GenS to Genting Malaysia.
Globally, due to the strength of its balance sheet, I feel Genting Berhad is a better bet in gaming than any other i.e. LVS, MGM, Wynn as well as its subsi i.e. GenS.

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