Genting Singapore - Three days left in Japan’s Extraordinary Diet Session?
- Possible extension of diet session
- Risky bets on binary outcome
- FV remains at S$0.75
What to consider for Japan’s casino bill
- Genting Singapore’s (GS) stock price has shot up 10% since our last report on 14 Nov – we attribute this to increased interest in the potential passing of Japan’s casino bill. There are a few considerations to note.
- First is the amount of time left in Japan’s Extraordinary Diet Session. The current session is set to end 30 Nov, though there remains a possibility of extending the Diet Session by one or two weeks. Do note that, according to news reports, it seems that it is possible for the minority party to block the debate of the casino bill from being added to the official legislative calendar.
- Second is the Liberal Democratic Party (LDP) majority. If the casino bill is successfully added to the lower house calendar, the ruling LDP could force the passage of the bill. However, such an unpartisan move would further erode Abe’s already diminished political credit; Abe has already received much flak for forcing through the Trans-Pacific Partnership (TPP) in the lower house only to have Trump re-affirm his intention for US to leave the TPP.
- Third is Abe’s economic ambitions. Abe may be even more reliant than before on the enactment of the casino bill to achieve his economic outcomes, with the TPP in jeopardy after Trump’s anti-TPP statements.
- Fourth is the competition to receive the license. Even if the bill is passed, GS has to beat several other international casino players to win the license.
Investors betting on a binary political outcome
- Given the unpredictability of political outcomes, we do not have a view on whether the casino bill will be passed.
- While we recognize that the passing of the bill could potentially catapult the stock to higher price levels, we also believe that the failure to pass the bill would precipitate a sharp downside. In light of these binary outcomes, we strongly advise investors to remain cautious when trading the stock.
- We maintain SELL on Genting Singapore with a fair value of S$0.75.