Genting Spore Q1 beats estimates, but analysts cautious on outlook

Thursday 9th of May 2019

Genting Singapore Q1 results topped expectations, mainly helped by a higher luck factor, though analysts say they are cautious about near-term prospects.

Net profit declined 5 percent to S$205.7 million ($150.7 million) from the prior year, while revenue dropped the same percentage amount to $640.3 million. The operator of Resorts World Sentosa said EBITDA dropped 8 percent to $330 million.

The results were helped by a higher VIP win of 3.3 percent and lower bad debt provision of $11 million.

“Reported net income of S$205m was better than we expected,” Morgan Stanley said in a note.

“However, the company appeared cautious about future credit extension to Chinese VIP customers amid geopolitical tension, and it sees near-term competition from other ASEAN countries.”

“With limited near-term catalysts (Japanese license winner in mid-2020 at the earliest, 1,100 new hotel rooms in 2024), upside looks limited.”

The company said it is “stepping up its efforts and deploying more resources to be seriously engaged in the anticipated competitive bid process” in Japan.

“The group is well positioned to deliver a compelling bid that will showcase a large-scale integrated resort destination significant contributions to its tourism economy,” it said.

It is also investing $4.5 billion to expand its Singapore property, primarily by adding new non-gaming amenities.

“There is no better way to drive revenue than incremental hotel rooms,” Union Gaming analyst Grant Govertsen wrote, however he noted that those won’t come online until 2024 at the earliest and the firm doesn’t view the non-gaming amenities that will open earlier as being significant drivers.

“Simply put there is too much near and medium term pain (higher entry levy, higher GGR tax as of early 2022, generally cautious macro outlook on current operations) to get us more constructive at current valuation.”

The firm estimates VIP volume fell 19 percent in the quarter, while revenue from mass and slots gained 3 percent.

Non-gaming revenue rose 1 percent to $209.2 million, posting its eighth consecutive quarter of year-on-year growth. The resort pulled in average daily visitation to its key attractions of about 19,000 while hotel occupancy remained at 93 percent.