Currency headwinds to impact Genting Singapore's mass and VIP markets

Tuesday 8th of September 2015

Analysts have cut their forecasts for Genting Singapore due to weakness in the Singapore and Chinese economies and currency headwinds with the Malaysian Ringgit and Indonesian Rupiah.

The depreciation of the two currencies against the Singapore Dollar will negatively impact both VIP and mass market trends for Genting Singapore, Union Gaming and Morgan Stanley said in a note.

“After being resilient for the past four years,Singapore gaming revenues finally facing several issues. We expect 2015/16 Singapore GGR to decline 21 percent and 6 percent YoY to US$4.7bn and US$4.5bn respectively, versus our initial GGR estimate of US$5.2bn and US$5.5bn,” Morgan Stanley said.

It said the downgrade was in part due to lowered expectations for growth in Singapore, where the economy is now expected to grow 2.3 percent in 2015 and 2.8 in 2016 vs previous estimates of 3.2 percent and 3.4 percent respectively.

Analyst Grant Govertsen said UG is lowering its 15Q3 and forward estimates for Genting Singapore in the face of continued currency headwinds for two core customer geographies, Indonesia and Malaysia.

Over the first two months of the third quarter, the Malaysian Ringgit and Indonesian Rupiah have depreciated by more than 10 percent and 4 percent, respectively, on a year-on-year basis relative to the Singapore Dollar.

“These currency headwinds will negatively impact both VIP and mass market trends in the quarter, which will only be partially offset by a nearly 10 percent appreciation in the value of the Chinese Yuan Renminbi (CNY) relative to the SGD over the same time period, although the CNY strength will largely be applicable to only the VIP segment.”

UG has lowered its 15Q3 EBITDA estimate to SG$272 million ($192.6 million), down 3 percent from previous estimates, while its EBITDA estimate for 15Q4 has also been lowered 3 percent to SGD$266 million.

Morgan Stanley said the market overall will see a VIP revenue decline of 43 percent in 2015, while mass is relatively robust at - 8 percent YOY.