Fundamental Analysis for GENTING BHD Date of Analysis: 3-Jun-11 Company Name: GENTING BHD Board: Main Stock Code (Bursa): GENTING FBMKLCI: Y Stock Code (Bloomberg): GUIN:MK Sector: TRADING SERVICES Stock Code (Reuters): GUMS.KL Industrial PE: 13.93 Price as of Analysis: 11.1 Rolling EPS:.75 Stock Grade Large Cap Growth Financial Statements: Year over year, Genting Berhad has been able to grow revenues from 8.9B to 15.2B. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 6.6% to 56.19%. This was a driver that led to a bottom line growth from 1.B to 2.2B. 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Income Statement -> Sales Revenue & Net Income After Tax increasing in the past 4 years. 1.2. Cash Flows -> Net Cash from Operations increasing in the past 4 years. 1.3. Growing/consistent revenue in EPS, revenue and net profit in the last 4 quarters. 1.4. The current quarter's EPS is up more than 15% from the same quarter the year before. 2 - Sustainable Competitive Advantage 2.1. Strong brand, monopoly or barriers to entry 2.2. Gross Profit Margin (> 4%) & Net Profit Margin (> 1%) high & consistent 2.3. Consistently high ROE > 15% 3 - Strong Future Growth Drivers 3.1. Able to deliver double-digit growth in next 3-5 years 3.2. LT Growth Rate is positive 4 - Conservative Debt 4.1. Long term debt < 4 times Net Profit 4.2. Debt/Equity Ratio < 1 4.3. Current Ratio > 1 5 - Positive Accounting KPI & Ratios 5.1. DUE-D Basic > 7%
5.2. FQA Score > 6% 5.3. SWC Score > 7% p.a. 5.4. ROIC > 15% 6 - Healthy Cash Flow 6.1. Working capital increase slower than sales 6.2. Short & declining "Cash Conversion Cycle" 6.3. Free Cash Flow / Sales > 5% 7 - Management is Holding/Buying Stock 7.1. Is key management holding/buying large proportion of stock. 8 - Risks are Managed 8.1. Understand the risks of the company and how it is managed. 9 - Price is below Intrinsic Value 9.1. Price is below Intrinsic Value (Bonus: Price can double within 3 years) 1 - Stock Price Breaks out of Consolidation/Dip on an Uptrend 1.1. Stock price breaks out of consolidation/dip on an uptrend and above 2 and 5 moving averages on monthly chart.
1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Income Statement -> Sales Revenue & Net Income After Tax increasing in the past 4 years. RM (') 26 27 28 29 21 TOTAL REVENUES 6,943,8 8,483,8 9,82,5 8,893,6 15,194,7 NET INCOME 1,54,2 1,988,9 569,3 1,44,3 2,23, 16,, 14,, 12,, 1,, 8,, 6,, 4,, 2,,.986666667 1.48 2.96 26 27 28 29 21 TOTAL REVENUES NET INCOME 1.2. Cash Flows -> Net Cash from Operations increasing in the past 4 years. RM (') 26 27 28 29 21 NET CASH FROM 2,597,3 2,844,1 2,518,1 2,551,8 6,281,7 OPERATIONS 7,, 6,, 5,, 4,, 3,, NET CASH FROM OPERATIONS 2,, 1,, 26 27 28 29 21
1.3. Growing/consistent revenue in EPS, revenue and net profit in the last 4 quarters. 6 5 4 3 2 3113744 4857 39929 486714 4889158 Turnover Trend Net Profit Trend 1 3/1/21 6/1/21 9/1/21 12/1/21 3/1/211 25 2 15 1 5 EPS Trend 2 2.72 22.25 12.57 6.29 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Quarter 1.4. The current quarter's EPS is up more than 15% from the same quarter the year before. EPS Growth: 254%
2 - Sustainable Competitive Advantage 2.1. Strong brand, monopoly or barriers to entry 1. Does it have a monopoly situation? YES 2. Does it have a strong leading brand? Very Strong 3. Does it have a high barriers to entry? Very High 4. Does it have market leadership? Very Strong 2.2. Gross Profit Margin (> 4%) & Net Profit Margin (> 1%) high & consistent Gross Profit: Profit After Tax: 6,657, Sales Revenue: 15,194,7 2,23, Minority Interest: 13,949, Gross Profit Margin: 44% Net Profit Margin: 16% 2.3. Consistently high ROE > 15% ROE 18 16 14 12 1 8 6 4 2 21 22 23 24 25 26 27 28 29 21
3 - Strong Future Growth Drivers 3.1. Able to deliver double-digit growth in next 3-5 years Summary of analyst reports on company and industry projections: Summary of CEO message on future prospects: 3.2. LT Growth Rate is positive LT Growth Rate: 24.7
4 - Conservative Debt 4.1. Long term debt < 4 times Net Profit Long Term Debt: 11,823,5 Long Term Debt < 4 times Current Net Earnings (After Tax): 5.37 4.2. Debt/Equity Ratio < 1 Debt/Equity Ratio:.66 4.3. Current Ratio > 1 Current Ratio (MRQ): 3.26
5 - Positive Accounting KPI & Ratios 5.1. DUE-D Basic > 7% DUE-D Basic: 7% 5.2. FQA Score > 6% FQA Score: 93% 5.3. SWC Score > 7% p.a. SWC Score: 13.41% 5.4. ROIC > 15% 27 28 29 21 EBIT (1-Tax 3,46,5 1,59,1 2,51,3 3,91,5 rate%) Total Equity 21,537,3 21,413,4 25,712,4 29,446,5 Short Term Debt 152,1 322, 127,6 Long Term Debt 4,28,5 5,412,3 12,659,5 11,823,5 Cash & Equiv 9,745,3 9,62, 15,4,2 16,272, ROIC 19.26% 9.15% 8.66% 15.56% 25.% 2.% 15.% 1.% ROIC 5.%.% 27 28 29 21
6 - Healthy Cash Flow 6.1. Working capital increase slower than sales 27 28 29 21 Sales Revenue 8,483,8 9,82,5 8,893,6 15,194,7 Sales Growth YOY 7% -2% 71% Inventory 422,5 43,1 432,1 534,8 Accounts Receivable 712,6 1,11,2 1,11,2 2,288,1 Accounts Payable 1,369,1 1,512,2 2,384,2 4,17,5 Working Capital -234, 19,1-841,9-1,284,6 Working Capital Growth YOY -18.16% -457.85% 52.58% Inventory Days 18.18 17.28 17.73 12.85 Days Receivable 3.66.99 1.48 2.96 Days Payable 58.9 6.77 97.85 98.67 Cash Conversion Cycle -1.7-42.5-78.64-82.86 1% % -1% -2% -3% -4% -5% 27 28 29 Sales Growth YOY Working Capital Growth YOY 6.2. Short & declining "Cash Conversion Cycle". -2. 27 28 29 21-4. -6. Cash Conversion Cycle -8. -1. 6.3. Free Cash Flow / Sales > 5% Free Cash Flow/Sales: 8.2%
7 - Management is Holding/Buying Stock 7.1. Is key management holding/buying large proportion of stock. Shareholding Analysis: KIEN HUAT REALTY SB is the major shareholder.
8 - Risks are Managed 8.1. Understand the risks of the company and how it is managed. Risk Management:
9 - Price is below Intrinsic Value 9.1. Price is below Intrinsic Value (Bonus: Price can double within 3 years) Valuation Method Discounted Cash Flow Growth Rate 5Y - 24.7 3Y - 32.71 19.16 22.45 6.97/3 6.97/2 Dividend Discounted.78.73 Known with low dividend PE 16.4 14.32 12.1 Sector Avg. PE PE Model 12.3 1.74 9.8 1.45 PEG.9 1.3 1.22 1.6 Estimated IV: From 9 To 12.3 Discount from IV: From -23.3% To 9.8% Discount from IV is not more than 2% Based on PEG, it is currently overvalued. Remark
1 - Stock Price Breaks out of Consolidation/Dip on an Uptrend 1.1. Stock price breaks out of consolidation/dip on an uptrend and above 2 and 5 moving averages