Genting Singapore Q3 profit jumps, but outlook uncertain

Thursday 3rd of November 2016

Casino operator Genting Singapore reported net profit almost tripled in the third quarter of 2016, owing to its focus on higher margin business and better operational efficiency.

Net profit for the quarter was S$106.8 million, compared with $37.2 million reported in the prior year period, according to a filing on Thursday.

Third quarter revenue was down 9 percent to $581.5 million, from S$636.1 million in the previous year, while adjusted EBITDA was $233.6 million, a near doubling from the last quarter.

“Adjusted EBITDA doubled as a result of increased revenue, improvement in operating margins arising from cost efficiency initiatives implemented from the last quarter as well as lower impairment of trade receivables,” said the company.

“This achievement has been the fruits of our ongoing commitment to focus on better margin business and managing operational efficiency for better margins.”

The operator said it remained cautious about the VIP business.

“Since early 2016, we have scaled down this business segment and the provision for bad debts related to this segment has consequently reduced. We will continue to see improved margins in this segment over the next few quarters. Together with a measured approach in the premium mass market, we are confident of a sustainable earnings growth into the next year.”

Union Gaming said the company beat its forecasts for EBITDA, though missed its estimates on revenue. However, the firm said it would maintain its hold on the stock due to the uncertain outlook.

“Despite the margin improvement, gaming metrics are still trending in the wrong direction and management's tone remains very cautious with respect to near term prospects,” it said.

The company surprised by paying an interim dividend of 1.5 cents and will pay a final dividend (anticipated to be of same amount). "Return of capital has been one area of focus which we think if increased can facilitate an upward stock price movement", said Union Gaming analysts. "However, we must still wait to see if the company follows through on this endeavor."

VIP GGR was down 25 percent year on year and down 64 percent sequentially. Mass and slots GGR was down 11 percent year on year and non-gaming revenue fell 6 percent.

In Korea, a recent typhoon has setback the company's Jeju project by an undetermined amount of time. The company anticipates applying for its gaming license early next year.