Genting Singapore Plc, operator of the Resorts World Sentosa casino resort (pictured) in Singapore, reported on Thursday a net loss of SGD10.5 million (US$7.8 million) for the second quarter of 2016. The performance for the period was affected by a decline in gaming revenue, which was a consequence of an unusually low VIP hold rate of 1.7 percent, said the company.
The second quarter results missed analysts’ consensus. The net loss for the period however was still an improvement from the SGD16.9-million loss recorded in the prior-year quarter.
For the three months to June 30, Genting Singapore reported total revenue of SGD480.9 million, down 17 percent from a year earlier. Group-wide adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 61 percent year-on-year to SGD116.1 million.
Resorts World Sentosa contributed with revenue of SGD480.4 million and adjusted EBITDA of SGD123.5 million, the firm said. Gaming revenue accounted for 69 percent of group-wide revenue, at SGD331.9 million. It was still down 23 percent from the prior-year period.
The casino operator said Resorts World Sentosa “has been able to maintain good earnings in the mass and premium mass market despite a weak environment”. “However, our premium market has been significantly impacted by a low win percentage,” it added.
Genting Singapore said that on a theoretical normalised hold basis, Resorts World Sentosa would have generated revenue of SGD552.9 million and adjusted EBITDA of SGD192.3 million.
“Second quarter 2016 and first half 2016 results were below our expectations, even after adjusting for normalised VIP hold rate,” said Samuel Yin Shao Yang of Maybank IB Research, in a note on Friday.
“VIP volume and mass market gross gaming revenue (GGR) were weak despite earlier indications to the contrary,” he added.
Maybank estimated that second quarter VIP volume fell 40 percent year-on-year, while mass market GGR declined 10 percent from the prior-year quarter.
Genting Singapore said it continues to “exercise caution” in its VIP gaming business. “We have implemented several cost efficiency initiatives where there were once-off costs impacting this quarter’s results,” said the firm.
“Such initiatives will continue into the next quarter, and we are confident that these programmes will improve earnings in the following quarters,” it added.
The firm’s management however said on a conference call following the results announcement that it does not expect VIP volume to improve in the foreseeable future.
Lower bad debt provisions
Japanese brokerage Nomura said that among the positive notes in Genting Singapore’s results was the reduction in impairment losses. The firm reported an impairment loss on trade receivables – including credit extended to VIP players but not paid back – of SGD53.6 million for the quarter, down 5 percent from the prior-year period and 42 percent sequentially.
“Receivables balance is down to SGD393 million, which suggests narrower impairments ahead,” said analysts Tushar Mohata and Alpa Aggarwal in a Friday note.
Resorts World Sentosa “continued to be a market underperformer,” said a note on Thursday from Union Gaming Securities Asia Ltd, adding that “visibility on any sort of turnaround seems even more opaque than in Macau”.
Referring to Genting Singapore’s bad debt provisions, Union Gaming’s analyst Grant Govertsen said that “another quarter or two will be needed to get to the other side of what has become a long-term credit problem”.
“Based on current levels of demand and under the assumption that bad debt will normalise over the next few quarters while at the same time cost-saves start kicking in, we think Resorts World Sentosa can begin to approach SGD1 billion in EBITDA on an annualised basis,” he added.
Several brokerages said they would be revising their 2016 and 2017 estimates for Genting Singapore to account for the firm’s operating results, including lower VIP volume and mass market GGR.
Maybank cut its EBITDA estimates for 2016 and 2017 by 31 percent and 23 percent, to SGD628 million and SGD792 million respectively. It also slashed its earnings estimates by 61 percent and 40 percent, it said.
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, a property to be named Resorts World Jeju.
In Thursday’s filing, the company said construction of the Jeju scheme is “progressing well”. “The take up of the residential plot continues to be well received and we are on track for the soft opening of Phase 1 in the fourth quarter of 2017,” the firm said.
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"The [Macau] government has a lead in this subject in regards to what should be done after the [gaming] concessions expire. We will be first listening to what the government will say”
Ambrose So Shu Fai
Vice-chairman and chief executive at Macau casino operator SJM Holdings