To err is but human, to admit is divine. Genting Singapore, my biggest mistake ($1.52) Buy.

Some people say, when a person reaches an extreme level of exhaustion, they either blank out or get inspired. What I realised from my own experience is, when I gamble till late at night in a casino, I tend to get reckless and gamble with larger amounts. Thank god I only gamble in Genting Highlands and not Marina Bay Sands because the ringgit is a lot smaller and also the minimum bet is lower. Honestly, I only feel like blanking out right now but what I am going to do is to try to give my self a boost and write something interesting today.

I have to admit, I have a gambler's mentality and much like my idol, Li Nanxing, who loves to gamble both in real life and reel life. There is something about gambling that makes me excited and please do not tell my parents or they will be putting me on the "to bar" list on our 2 casinos. Very proud of myself that I have only visited the casinos thrice since their opening (Pay attention Peoples Action Party, the 100 bucks entrance did not deter me). There is without a doubt that that Marina Bay Sands is the a lot classier and posh. It made me feel like Yan Fei, only without the suit and no Zoe Tay by my side. As for the company I am focusing on today, I have a totally different feel for it.

Before I start with any analysis of the company, I would like to say that this is probably the worst calls in my investing life. I have been cursing this company since the first day I was involved in their share placement at 20 odd cents, all the way back 5 years ago. This is one stock I have been pushing for a strong sell on this counter for the longest time, with my arguments based on share dilution, track record etc. Now it has come back to haunt me, hitting all time high of $1.68 this morning before pulling back to $1.52. Before I admit this was a bad call, I am going to go through the financial statement right now and give you my thoughts. It has been a hectic week so far for me, working 12 hour days and suffering from insomnia, but I still have the compulsion to read through Genting's statement. Those who know me will know that I hate being wrong and when I am wrong, I want to know where I went wrong and why did I come to the wrong decision. So lets get started.

Genting Singapore PLC* ("Genting Singapore") is a leading integrated resorts development specialist with over 20 years of international gaming expertise and global experience in developing, operating and/or marketing internationally acclaimed casinos and integrated resorts in different parts of the world, including Australia, the Americas, Malaysia, the Philippines and the United Kingdom (“UK”).

It is a subsidiary of Genting Berhad and was incorporated in 1984 to invest in leisure and gaming-related businesses outside Malaysia. Genting Group is a collective name for Genting Berhad and its subsidiaries and associates. Genting Group is one of Asia’s leading and best managed multinationals. The Group is renowned for its strong management leadership, financial prudence and sound investment discipline.

The company's principal activities are:
* Development and operation of integrated resort
* Casino operations
* International sales and marketing services
* IT application related services

Genting Singapore has an experienced management team that is focused on and committed to growing its business globally. The Group is the largest casino operator in the UK and had developed integrated family resort in Singapore.

Lets start with the profit statement. Revenue top line growth expanded by more than 100% qoq from $460 million to $979 million. YOY it was even more impressive. Up more than 700%. Gross profit margin was also stronger as the cost of sales only rose by 65% qoq. Net profit came stronger than expected with net margin of 40% which shows how lucrative the integrated resort business is. Diluted earnings per share came in at 3.29 cents for the quarter and that is just mind blowing considering there are more than 12 billion shares out there! Revenues from the integrated resort alone was $860 million and what really impressed me was how people loved Universal Studios considering the fact that 8000 people have visited there on a daily basis and spent a whopping $84 bucks per person! You gotta be kidding! Just do the math, $672,000 per day and multiply it by 365 days. That is a quarter billion bucks per year. Singaporeans simply love thrill rides.

Balance sheet strength wise, I have to admit, at this point, it does look like I may be wrong on my sell call because the net equity to shareholders stands at $4.575 billion. Current liabilities only stand at $1.2 billion which is more than manageable with their $3.2 billion cash hoard. I was worried about Genting needing to raise more money but they do not look like they do in the short term. They do have around $4 billion in long term debt, but this can be easily refinanced in the longer term if they are able to sustain this earnings profile and positive operational cash flow. A large chunk of the long term borrowings is secured by the license of the integrated resort.

Cash flow from operations have seen a strong inflow for 1H10, coming in at a stellar $730 million. That is just pretty amazing and to think that the casino operations only started during Chinese New Year this year.

Enough of the good stuff, now for the bad stuff. The proposed sale of Stanley Leisure, the UK casino operations of Genting Singapore to their parent Genting Malaysia for 340 million pounds may sound good to many people, but to me, it shows that they are up to their old tricks again. After taking years of losses due writedowns from their UK operations, they have decided to sell it to Genting Malaysia at a cheap price. So poor Singaporean shareholders who have suffered from the numerous writedowns now have to see an asset that has been stripped down to its bare fundamentals, sold away just when there is light at the end of the tunnel. This is one of my main arguments against Genting Singapore, that is, they will always be giving their parent the good deals and leaving Singaporean shareholders high and dry.

Regardless of my impression and strong dislike for this company, I have to bring myself to put on record that I have been wrong about its prospects because I may have underestimated the allure of gambling to Singaporeans and our multi talented foreign talents. You know what I am impressed with? The fact that Marina Bay Sands have opened since April 2010 and Genting has maintained its growth rate. I expected there to be some attrition rate from Genting Singapore but it is does not seem to be the case. No matter what, I am still going to say there will still be some attrition going forward and I expect earnings over the next two quarters to impress on a YOY basis but show a slowdown on a QOQ one. Genting Singapore registered flat earnings for 1H2010 taking into account the losses from 1Q2010.

If they are able to register the same kind of earnings for the rest of the year, it will really be impressive and will only be trading at 23 times p/e but full year earnings of 2011 will only be 11.5 times. There is a good chance they may be re-rated to close the gap between them and their peers in Macau. Therefore it is possible that this stock could be a lot higher going forward. I am going to price it at $1.95 first. It is impossible to rule out the possibility of moving to $2.40-$2.60. I cannot believe I am writing this and am sure my closest friends in the brokerage business are going to be laughing when they read this.

As I have put on the title of this post. To err is but human, but to admit is divine. I am only human and its not too late to say I was wrong.

Best,

SVI