Is Genting Singapore running out of luck?
Is Genting Singapore running out of luck?
http://www.theedgemarkets.com.sg/sg/article/genting-singapore-running-out-luck
SINGAPORE (July 27): DBS Vickers Securities is keeping Genting Singapore (GENS) on “hold” with an unchanged target price of 79 cents, ahead of the expected release of GENS’s 2Q16 results on Aug 4.
DBS analyst Mervin Song on Tuesday warned of “potential weakness” in 2Q16 for GENS, which operates the Resorts World Sentosa integrated resort.
This comes after Singapore’s other integrated resort, Marina Bay Sands (MBS), on Tuesday reported its earnings continued to shrink in 2Q16.
MBS’s VIP gross gaming revenue (GGR) fell 16% in 2Q as VIP rolling chip volume tumbled by 29% to US$6.7 billion ($9.1 billion).
This was mitigated by MBS’s improved win rate of 3.5%, which is above the theoretical win rate of 2.85%, Song says.
Despite a recent surge in tourist arrivals into Singapore, MBS’s mass gaming “unexpectedly underperformed” with 2Q mass dropping 11% to US$936 million.
“With MBS reporting a weak set of results, we expect GENS to also exhibit declines in both its VIP and mass businesses,” says Song.
However, Song believes GENS’s VIP segment decline might be smaller in 2Q16, as its VIP rolling chip volume had already hit the US$6-6.5 billion level over the last two quarters.
Meanwhile, MBS’s bad debts remained above US$30 million for the third consecutive quarter, at US$31 million. Bad debt as a percentage of account receivables jumped to 4.2% in 2Q16, from 2% in the corresponding quarter last year.
“We understand that GENS is still working through its receivables, hence GENS’s 2Q16 bad debts is likely to remain elevated,” says Song.
However, Song says GENS has been “deliberately restricting credit to its VIP customers over the past year to counter potential bad debts”.
Going forward, this comes with a silver lining for GENS.
“GENS may now have a better grasp over the type of customers it wants to do business with, and GENS’ could potentially be more open to extending credit on a selective basis,” says Song. “There is potential for GENS to start reporting sequential improvements in VIP volumes in 3Q16 and 4Q16.”
As at 10.56am, Genting Singapore is trading 0.6% higher at 78 cents.
. I really like genting sg as a perp bond. 3bil net cash. Very low leverage. But i reckon they will recall their perps next year seeing that they can get financing from banks at 3% now.
