GEN Singapore swings to loss in 4Q on lower VIP revenue
Casino operator Genting Singapore Plc swung into the red with a net loss attributable to shareholders of approximately SGD7.8 million (US$5.6 million) for the fourth quarter of 2015. That compares to a net profit of SGD89.2 million in the prior-year quarter.
The casino firm on Thursday reported revenue of SGD547.4 million for the three months to December 31, down by 14 percent from a year earlier. Operating profit for the period declined 74 percent year-on-year to SGD43.4 million, partly due to higher operating expenses, the firm stated in a filing to the Singapore Exchange.
Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) came in at SGD181.3 million in the fourth quarter, down by 51 percent from the prior-year period.
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 SGD374 million for the three months ended December 31, down by 19 percent. It stated the decline “was impacted by a lower VIP gaming market” as the company continued to tighten its credit policies.
“The decrease in revenue was partially mitigated by lower operating costs and overheads, which was achieved through various operational efficiency improvement initiatives,” the company said in Thursday’s filing.
“Resorts World Sentosa’s VIP segment continues to decline (-44 percent year-on-year, -2 percent sequentially) as the property is not only dealing with demand weakness on several fronts (e.g. China economy, China anti-corruption [campaign], Malaysian Ringgit weakness, Indonesian Rupiah weakness), but with management’s more cautious strategy,” Union Gaming Securities Asia Ltd said in a note on Thursday.
“At best we believe this segment will be stable going forward from a volume perspective relative to fourth quarter 2015,” said analyst Grant Govertsen.
Genting Singapore’s impairment loss on trade receivables – which includes bad credit extended to VIP players – fell significantly in the fourth quarter. The firm reported an impairment loss of SGD45.3 million in the quarter, down 45 percent from a year earlier.
Singapore has strict rules on issuing licences for junket operators – known locally as International Market Agents – to work in its casino industry. Of the two casino resort operators in the city, only Genting Singapore chose to use such agents. As a result, in Singapore much of the credit for VIP play and the risk on such credit is the responsibility of the house. That is different from Macau, where the junket middlemen absorb much of the credit risk in the VIP segment.
“Bad debt continues to be a problem, although less of one,” said Mr Govertsen, of Genting Singapore’s trading situation. “Bad debt should be reduced throughout 2016 as more strict credit policies are anniversaried, although these same more strict credit policies are likely to result in stagnant VIP volume at best.”
‘Challenging year’
For the whole of 2015, Genting Singapore’s net profit plunged 85 percent year-on-year to SGD75.2 million, on the back of a 16 percent dip in revenue to SGD2.4 billion.
The annual profit attributed to shareholders was the smallest since 2010, when Resorts World Sentosa first opened – then the firm posted a net profit of SGD37.8 million.
Adjusted EBITDA for full 2015 was SGD915 million, down by 21 percent. On a theoretical normalised hold basis, the firm said Resorts World Sentosa would have generated an adjusted EBITDA of approximately SGD1.1 billion.
“Resorts World Sentosa operations had shown firm results and remain healthy against the backdrop of the slow economy and challenging environment,” said Genting Singapore.
The firm reported gaming revenue of SGD1.7 billion for full 2015, a 21-percent decline from the previous year. Impairment losses on trade receivables increased by 3 percent year-on-year to SGD270.7 million.
“2015 has been a challenging year for the Asian gaming industry,” the firm said. “Our focus remains on developing the regional premium mass and mass gaming business,” it added.
The company announced a dividend of SGD0.015 per share for 2015, up from SGD0.01 the previous year.
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.
“Development of Resorts World Jeju is progressing as planned. Construction of the hotels, retail and entertainment parts of the integrated resort plot has commenced. The construction of residential plot is advanced, and we expect to commence sales in the second quarter of 2016,” the firm said in Thursday’s filing.
On a conference call with analysts following the results announcement, Genting Singapore’s management noted that they expect the partners in the Jeju scheme to have to spend another US$500 million to complete the development, said Union Gaming’s note.
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