Genting Singapore Plc, operator of the Resorts World Sentosa casino resort in Singapore, swung into the red with a loss attributable to shareholders of SGD16.9 million (US$12.1 million) in the second quarter of 2015, from a profit of SGD102.3 million in the prior-year period.
Including SGD29.4 million apportioned to holders of perpetual securities, the casino firm made a net profit of SGD12.5 million, down by 91 percent from SGD131.7 million a year ago.
Revenue for the period fell 23 percent year-on-year to SGD578.1 million, Genting Singapore said in a filing on Thursday. The firm attributed the decline to a “downturn of the gaming industry in Asia”.
Gaming revenue at its Resorts World Sentosa fell by 28 percent year-on-year to SGD428.3 million for the three months ended June 30. “The contraction is a result of the unfavourable global VIP premium business and rolling win percentage,” the casino operator said.
The company last week had already warned investors that it expected to report “a significant decline in net profits” for the quarter ended June 30.
Genting Singapore reported adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of SGD296.5 million, down by 6 percent from a year earlier.
The firm said its net profit for the quarter was also affected by fair value loss from its portfolio investments, which “is related to unfavourable market conditions in the gaming industry”.
The company reported fair value loss of equity linked instruments of SGD95 million in the second quarter, which includes investment in other gaming and leisure listed companies, and unrealised foreign exchange losses of SGD84 million.
Genting Singapore said it continues to exert caution in extending credit to VIP players. “The gaming industry remains weak. We maintain a cautious approach in granting credit under this market condition and continue to focus on the foreign premium mass and mass-market segments in the region. Our mass gaming business continues to remain steady,” it said.
Brokerage Sanford C. Bernstein Ltd said in a note on Thursday that Genting Singapore’s VIP gross gaming revenue (GGR) was approximately SGD236 million for the second quarter, down by 55 percent year-on-year. “VIP GGR was low partly due to a low hold of 2.1 percent versus 3.0 percent in the second quarter of 2014,” said analysts Vitaly Umansky, Simon Zhang and Bo Wen.
The bad debt impairment loss was SGD56.6 million in the second quarter of 2015, compared to SGD81.6 million a year ago.
“Bad debt expense is stabilising as the company makes continued efforts measures to unwind the poor credit quality associated with its past extensions of VIP credit,” said the Sanford C. Bernstein team.
The brokerage said mass GGR – including revenue from tables and slots – was approximately SGD270 million, a drop of 4 percent from a year earlier. “Mass and premium mass both showed sequential resilience (supported by the local South East Asian customer base),” it added.
Although the mass segment remained stable for Genting Singapore, a note from Morgan Stanley Research Asia Ltd said mass revenue could come down “if Malaysian/Indonesian customers spend less should [their] currency continue to depreciate” against the Singapore dollar.
In February, Genting Singapore broke ground on the US$1.8 billion Resorts World Jeju development, which is slated to open in multiple phases between 2017 and 2019.
The firm said on Thursday the construction work for Resorts World Jeju is progressing as scheduled. “Soil works is expected to be completed before end of this year and building works is targeted to commence early next year, subject to relevant approvals from the Jeju authorities,” it said.
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”We expect Goa to quickly become a US$1 billion market as it transitions to land-based casinos (from US$150 million today), which is still just a fraction of India’s total GGR potential of US$10 billion to US$17 billion”
Analyst at Union Gaming Securities Asia