Downside risk is limited amid undemanding 15.2x FY19 P/E (vs 10Y average of 16.7x) and the oversold positions coupled with the optimism from multiyear fruit yielding (from FY18 onwards) for its GITP investment. The high visitation rate will continue to provide the springboard for growth amid the progressive rollouts of new amenities, followed by 20th Century Fox theme park by year end. Meanwhile, the worry on the erosion of margin will be offset by the upside provided by the zerorisation of GST.

HLIB institutional research pegged a SOP TP of RM5.80 (+15.8% upside), premised on the FY18 will be the start of multiyear fruit yielding for its 10-year RM10.38bn GITP investment. The overall increase in visitation will continue to provide the springboard for growth amid the progressive rollouts of more retail spaces, restaurants and casino floor followed by 20th Century Fox theme park by year end. Meanwhile, the worry on the erosion of margin due to longer gestation period and pre opening expenses will be offset by the upside provided by the zerorisation of GST.

Undemanding valuation. At RM5.01, GENM is trading at 15.2x FY19 P/E (against 10Y average of 16.7x). Downside risk is limited, supported by a robust 23% earnings CAGR for FY17-20 as sentiment is boosted by the optimism of multi-year fruit yielding (from FY18 onwards) for its GITP investment and potential rise in consumer spending from the zero-rated GST.

Pending for a downtrend line breakout. GENM’s share prices dived 26% from 52- week high of RM6.19 (25 July 17) to a low of RM4.59 (4 Apr) before creeping up to cross above the 200w SMA to close at RM5.01 on 1 June. As share prices are trending above the LT uptrend line (weekly chart) and above lower Bollinger band (daily chart), GENM is ripe for a downtrend line breakout after a brief sideways consolidation. A decisive breakout above the immediate resistance of RM5.20 (50% FR) will likely to lift share prices higher towards RM5.38 (downtrend line) and our LT objective at RM5.58 (61.8% FR). On the flip side, key supports are RM4.86 (lower bollinger band) and RM4.72 (200w SMA). Cut loss at RM4.69.

Source: Hong Leong Investment Bank Research - 4 Jun 2018