GenM: Huge Loss Due to Impairment3rd December 2018
If we exclude the provision for impairment loss for the investment in promissory notes for the development on US tribal land, Genm’s operating profit rose 120% q-o-q or 23% y-o-y to RM661.6 million. This improved performance is on the back of higher revenue, which rose 7% q-o-q or 15% y-o-y to RM2.60 billion.
Table 2: Genm’s quarterly results for QE30/9/2018
Below is the graph of Genm’s last 50 quarterly P&L. The top graph shows revenue and profits as reported while the lower graph shows profits excluding extraordinary gains or losses. From the lower graph, we can see that Genm’s revenue is rising steadily while profits, which have been flattish for past 6 years, are now swinging up.
Graph: Genm’s last 50 quarterly results
Genm(closed at RM2.86 last Friday) is now trading at a Price-to-Book of 0.9 times. We cannot compute its PER as Genm made a loss for the past 4 quarters.
Genm’s share price has been dropping like a stone in the past 2 months. The decline was due to fear of new/ increased taxes (which came true) and theme park problem. This morning, it will have to withstand any sharp drop due to the huge impairment loss.
I believe that the stock is oversold going into today’s trading. A drop to the long-term uptrend line at RM2.50 or the horizontal line at RM2.20 may bring out buying support.
Chart 1: GenM’s daily chart as at Nov 30, 2018 (Source: Malaysiastock.biz)
Chart 2: GenM’s monthly chart as at Nov 30, 2018 (Source: Malaysiastock.biz)
Despite the poor financial performance and earlier 2 bad news (increased casino tax by 10% and theme park hiccup), Genm is a good stock for long-term investment in view of its unique business and strong management.
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