Selling pressure on Resorts World

KUALA LUMPUR: Resorts World Bhd remains as one of the most highly owned stock by foreigners but the escalating domestic political uncertainty and government policies will continue to spook foreign investors.

OSK Investment Research said these uncertainties were placing increasing pressure on stock price performance over the medium term.

Ina research note issued Friday, it said Resorts’ 2% decline in visitors arrivals in 1Q08 period served as a signal that operating conditions will continue to worsen, especially towards the 2H as inflationary pressures from fuel and electricity hikes set in.

“We have reduced our terminal growth rate to 3% from 4% per annum, leading us to reduce our fair value to RM2.85 and recommendation to Neutral,” it said.

OSK Research said selling pressure would likely to persist well into third quarter period.

“The probability of higher casino tax and the potentially steeper than expected drop in 2H08 earnings performance have yet to be reflected in consensus earnings estimates, which has remained largely unchanged post fuel price hike versus our 18% downgrade,” it said.

The research house said these factors, coupled with its existing high foreign shareholding level of 37%-38% placed a high degree of vulnerability on consensus earnings estimates and subsequently share price performance.

“Current implied share price valuations of 15.3 times FY08 price-to-earnings ratio (PER) relative to its historical trading range of 11x-21x indicates that the market has yet to fully priced in the abovementioned risk factors.

“On a separate note, management has been more aggressive of late in its share buyback activities, accumulating up to 10.4 million share over the past four trading days, representing roughly 8-10% of the total trading volume,” it said.

http://biz.thestar.com.my/news/story.asp?f...41&sec=business

This post has been edited by lowyat888: Jun 20 2008, 10:06 PM

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