This article is authored by MOI Global instructor Brian Grosso, portfolio manager at JBF Capital. Brian will present a new idea (not the idea below) at Best Ideas 2019.

I wrote the thesis below last month. My views on Emperor Entertainment Hotel (HK: 296) remain the same, my position has not changed, and the stock is still available at a cheap price.

I believe Emperor Entertainment Hotel stock is a weighted coin. The stock is extremely cheap — if the assets were sold tomorrow I estimate the proceeds would be four times the recent stock price.

The main reason the stock is discounted is concerns about governance, but if we focus on how insiders have actually behaved, they’ve treated investors well.

That discount has been compounded recently by the bear market in China and Hong Kong, and Macau gaming stocks have declined more than the indices.

Even if Macau gaming activity declines and Emperor’s assets underperform, unless insiders behave unfairly, it’s hard to find downside in the stock and the upside is multiples of the current price.

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