Trading room – Wed 28 Nov 2018
It was reported by Star Online that Walt Disney Co and Twenty-First Century Fox Inc were sued for more than US$1 billion yesterday by casino operator Genting Malaysia Bhd, which accused them of abandoning a contract related to its planned construction of the first Fox-branded theme park.
According to the media report, Genting Malaysia said “seller’s remorse” induced Fox, with Disney’s help, to breach its 2013 contract with Fox Entertainment Group to license intellectual property for Fox World, a proposed addition to its Resorts World Genting complex, an hour’s drive from Kuala Lumpur.
The lawsuit was filed in the U.S. District Court in Los Angeles as Disney prepares to complete its $71.3 billion purchase of many Fox assets, expected in the first quarter of 2019.
It was later reported today that Disney and Fox rejected the claims as “without merit.”
Genting Malaysia said it had already made a “$750 million-plus investment” in Fox World. It is also seeking punitive damages.
The news sent both Genting Malaysia and its parent Genting, share prices sharply down yesterday. Genting Malaysia fell 16.7% to RM3.00, close to its low for the day of RM2.93, while Genting fell 7.5% to close at RM6.38.
Theme park operator cum leisure entertainment player OWG (Only World Group Holdings Berhad) also saw its share price falling 21.8% to RM0.485.
In reaction to the news, a research house has cut its fair value for Genting Malaysia RM3.65 from RM4.40 but has upgraded the stock to a buy.
As it is, the Genting group companies were hit by sell-downs on high volume previously in the aftermath of the Budget 2019 announced on Nov 2, 2018, which was a negative surprise for the gaming sector, as both casinos and number forecast operators (NFOs) were not spared.
According to an analyst report then, casino license fee will be raised to RM150m from RM120m p.a. while casino duty rate will be raised to 35% from 25% of gross gaming revenue and the number of special draws will be halved (for NFOs).
We had written in the mPower Algorithm report then that “Genting Malaysia volume of 379m then was at an all-time high for one year and if not for the fact that it was a first-day sell-off could have indicated a climatic bottom for the stock. With RM3.72 being the critical level for the stock, it appears that the sell-down may not be over. The stock will try to reclaim the level above in the next few hours/days and if failed, a re-test of the strong support at RM3.18 is the target.”
With this target reached (Genting Malaysia share price now at around RM3.00), is the selldown finally over? Where is the actual level to trade buy Genting Malaysia on weakness for elite traders?
For Genting, we had also written in the mPower Algorithm report then that “Genting traded lower on a high volume of 36m shares which was its high 3 months volume but not too overly excessive. The RM6.80 critical level should be used to assess the weakness of the stock for short opportunities. If the stock rise above RM6.96 on daily volume of more than RM10m, stay aside for short opportunities at a higher level. A long-term target for the stock (if stay below RM7.00) could be RM6.41/or lower.”
Genting actually broke the RM6.41 level yesterday and is now attempting a rebound? Is this the opportunity to trade in or its a bull trap for traders?
Meanwhile, for OWG, the selldown on the stock is already predicted from its downtrend which is in force sometime back. The selldown yesterday occurred at two key important considerations and you need to know these criteria before you decide to include the stock into your trading plan.
The trading action plan is very simple for OWG for elite traders and this is outlined in our mPower report. Act as soon as the key critical level mentioned in the report is breached in the direction of the breach.
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