• Positives likely priced in. Ahead of its phased openings of the Genting Integrated Tourism Plan (GITP) from Dec 2016, GENM rallied to an alltime high of RM4.97 before easing lower at RM4.91 yesterday. The share price rally was catalyzed by its recent disposal of a 16.9% stake in GENHK, as investors are positive that the disposal allows GENM to monetize its loss-making investment in GenHK which provides minimal income yield. In addition, the proceeds of RM1.71bn can be put into better use for its working capital and capex for its expansions.

• Rich valuations may cap further strong upside. However, further upside remai ns limited by the Genting Group’s low di vi dend payout and high capex/long gestation periods for recent investments (i.e. its US$250m investments in promissory notes of the tribal First Light Resort & Casino; continued losses at Bimini). Currently, GENM is trading at 20.8/19x for FY16/17 P/E, which are 24% and 13% higher than its 10-year historical average of 16.8x.

• Shooting star pattern is bearish reversal signal. Hence, we opine that the recent massive price surge has triggered concern about price sustainability, compounded by the steeply overbought indicators. In addition, the shooting star pattern is a bearish reversal signal. From a technical perspective, we advocate Take Profit with an immediate support near RM4.86 (upper Bollinger band). A decisive breakdown below RM4.86 will trigger further decline towards RM4.80 (23.6% FR) and RM4.62 (50% FR) zones. On the flipside, any rebound will see upside capped at RM4.97-5.05 levels.

Source: Hong Leong Investment Bank Research - 14 Oct 2016