GGRAsia – Bad debt provisions hit Genting Singapore’s 1Q results

Bad debt provisions hit Genting Singapore’s 1Q results

May 16, 2016 Newsdesk Latest News, Singapore, Top of the deck

Casino operator Genting Singapore Plc reported a net profit attributable to shareholders of SGD10.8 million (US$7.9 million) for the first quarter of 2016, down by 83 percent from the prior-year period. Revenue for the period declined 5 percent year-on-year to SGD608.0 million, the firm said in a filing on Friday.

Genting Singapore is the operator of Singapore casino complex Resorts World Sentosa (pictured) and is a subsidiary of Malaysian conglomerate Genting Bhd.

The company reported gaming revenue of SGD450.5 million for the three months ended March 31, down by 9 percent. The firm’s operating profit for the period declined 37 percent year-on-year to SGD82.1 million, partly due to higher operating expenses, the firm stated in the filing to the Singapore Exchange.

Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) came in at SGD192.5 million in the first quarter, down by 16 percent from the prior-year period.

Genting Singapore’s first quarter results were impacted by an increase in impairment losses on trade receivables – which includes bad credit extended to VIP players. The firm reported an impairment loss of SGD92.4 million in the quarter, up by 21 percent from a year earlier.

Union Gaming Securities Asia Ltd analyst Grant Govertsen wrote in a Friday note: “With bad debt exceeding our expectations this quarter, coupled with an incrementally bearish outlook on credit collections over the next few quarters (a retooled credit policy initiated in March 2016 will take time to right the ship), we expect the next couple quarters to continue to see property EBITDA margins in the low-30 percent range before finally getting back to the mid/high 30 percent range by year-end.”

Genting Singapore said it continues to exercise caution with its VIP gaming business. “In this connection, we have been prudent in providing for our gaming receivables,” the firm stated.

Morgan Stanley on Friday said: “VIP volume declined 29 percent year-on-year (but up 4 percent quarter-on-quarter) as Genting Singapore continued to implement prudent credit policies such as shortening credit terms to 30 days starting March 2016 versus 90 days previously.”

“[Bad debt] Provisions may stay elevated for the rest of the year as the company works on collecting debt from its customers,” analysts Praveen K. Choudhary, Xin Jin Ling and Alex Poon wrote in the note.

Genting Singapore said its mass gaming market segment started 2016 “on a better note with strong electronic gaming machines performance”.

“We have seen encouraging progress with the implementation of our new marketing strategies to grow the foreign premium mass market,” it added.

Union Gaming’s Mr Govertsen said: “Management’s tone on VIP remains decidedly bearish and our model reflects a 19 percent decline in volume this year, including modest sequential declines in volume owing to the again-tightened credit policy.”

Genting Singapore is currently planning expansion in other regional markets. It has a partnership with mainland China real estate developer Landing International Development Ltd to build a US$1.8 billion casino resort on South Korea’s Jeju Island, to be named Resorts World Jeju.

In Friday’s filing, the company said construction of the Jeju scheme is “progressing well”, with a soft opening of phase one expected in the fourth quarter of 2017. Construction of the residential part within the complex “is at an advanced stage,” the firm said, adding that sales have started in April.