Pretty, Chic and Rich: In the limelight

I have just posted about Genting two days ago and coincidentally, like I told my customers, this counter breakout with high volume yesterday. Today it hit a high of 0.98, one of the highest price recorded for the last two months. The reports on Genting Singapore and Marina Sands came in one after another.

Funny thing is that everyone expected Genting Singapore to drop due to the opening of Marina Sands but it happened otherwise, which leads me to wonder, is it true that market always work against our emotional decisions?

On the 28th April, Deutsche Bank upgrades Genting Singapore from hold to buy with a price target of $1.00 and J.P. Morgan analysed Genting Singapore as Overwight with a price target of $1.20.

Deutsche Bank upgrades Genting Singapore to Buy from Hold with a price target of S$1.00 (from S$0.91 previously). We believe the market is overly concerned about cannibalization risk (from MBS) and a smaller-than-projected Singapore gaming market size. Our data collection confirmed that the two-month-old Singapore gaming market is already US$2.2-2.4bn in size (annualizing current run rate), and with the recently opened MBS, the market will expand further. Genting Singapore’s share price has corrected 15.7% since the RWS opening in February (vs. STI’s +7.5% appreciation, and the valuation has fallen to 10x 2011 EV/EBITDA. While we expect Genting Singapore’s RWS to generate lower gaming revenue after the opening of MBS, an improvement in efficiency and continuous growth in the overall market should help mitigate some of the cannibalization effect. Even assuming RWS gaming revenue falls by 40-50% from the pre-MBS opening level, RWS should still meet Deutsche Bank’s forecast of S$1.7bn gaming revenue for FY10E. A more bullish top-down market approach of estimating the gaming market size at US$4.3bn (pegged at 0.3% of addressable GDP) would suggest SOTP of S$1.25/share assuming similar valuation methodology.

Understand from my customer that Marina Sands and Genting Singapore target different group of people(His company carries many of the distinguished brands in Singapore and they are in MBS). While Marina Sands target the upper end crowd, Genting Singapore is actually looking at the mass market. Reports actually did mention that the cannibalization is well contained and this two casinos will in fact, complement one another.