Genting Singapore

DBS Group Research on 20 Sept 2012

GENTING Singapore is placing out its entire 4.8 per cent stake of 39.6 million shares in Echo Entertainment, recognising a $16 million loss. This is a positive development because besides the soft gaming business, concerns about Genting getting entangled in an expensive takeover tussle against Crown for Echo were one of the key reasons why the stock was sold down from $1.75 in early May to $1.22.

Still, our analyst continues to note the soft Singapore gaming business given the continuing cautious lending to VIPs (further award of junket licences will likely come later rather than sooner) and slower growth in tourist arrivals (albeit Q4 2012 will be seasonally stronger along with completion of Resorts World Sentosa Western Zone).

Thus, we keep "hold" on the stock but revise the target price to $1.45 from $1.17. Technically, we believe that the stock found a significant low at $1.22 in late July. The current immediate support is $1.38. Using a Fibonacci projection, we see the rise that started from $1.22 reaching $1.49 before a pullback to $1.38. Post pullback and beyond the short term, we will track for price actions that can lift the stock further to $1.65.

HOLD