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Development Limited, which
is involved in the lighting
business as well as property
development,
integrated resort
development
and the casino
business. The
joint venture
will construct an
integrated resort
spanning over
2.3 mln sqm with
an estimated
development cost
of around US$1.8
bln. The highlights
include 1) Jeju’s
largest theme park
with more than 20
rides and seven
different theme
zones, 2) Jeju’s
largest adventure
waterpark, 3)
one of South
Korea’s largest
retail and F&B
complexes, 4) premium
hotels with more than 2,000
rooms, 5) full meeting and
conference facilities, 6) 1,500
luxury serviced apartments
and residential villas and
lastly, 7) a casino. Other than
RWJ, Genting SP is actively
exploring other opportunities
to develop new integrated
resorts. With a wider network,
it would be easier for the
group to attract and retain
tourists along with seasoned
VIP casino players.
Industry – Bleak Outlook
Ahead
The Asian gaming
industry is experiencing
tough times thanks to China’s
anti-corruption crackdown and
slowing economic growth. The
Chinese authorities have also
tightened capital controls over
the past few months, which
has affected the ability of VIP
players to pay the casinos and
junkets. In addition, there are
new casino projects in Macau,
South Korea, the Philippines,
Australia and others which
will intensify competition. In
Singapore, the moratorium for
the third integrated resort will
end in 2017. That said, there
is no official indication that a
third license will be issued in
the near term.
Las Vegas Sands
Corporation (LVS) operates
the Marina Bay Sands
(MBS) Integrated Resort in
Singapore, which is the only
other local casino competitor
to RWS. MBS is upping its
Singapore market share as it
has a larger operating network
(LVS has casinos in Macau
and the US), is less reliant on
Chinese players and has been
actively marketing MBS in
nearby regions.
Company Financials –
Numbers Will Improve After
2015
Genting SP commenced
operations in Feb 2010. Its
revenue spiked thanks to its
novelty factor – see figure 1.
Subsequently, sales declined
due to the challenging gaming
industry but said decline
was partly mitigated by
improving non-gaming sales.
Administrative and selling
and distribution expenses as
a percentage of sales inched
up from 9.0% in FY2010 to
10.2% in FY2014, mainly due
to higher employee expenses.
FY2010 profitability was low
due to an S$619 mln loss
for the sale of UK casino
businesses while FY2014
results were dragged down
by fair value loss on interest
rate swap and impairment
loss on receivables. The
trade receivables profile
has worsened over the past
few years and Genting SP
has been providing more
allowance for said receivables
FROM PAGE 14
– see
table 1
. That said, there
has been an improvement
in the receivables, which fell
from S$1.1 bln in FY2014 to
S$773 mln in 3Q FY2015.
For 9M FY2015, Genting
SP incurred a S$225 mln
impairment loss on trade
receivables, a S$274 mln
fair value loss on derivative
financial instruments (a hedge
where the floating rate loans
are swapped with fixed rate
loans), a S$90.7 mln loss on
“Genting has many unique
propositions such as its
flagship project in Singapore,
its recent launch of GHJ and
its upcoming project RWJ in
South Korea. The receivables
profile is improving and we
reckon that RWS is capable of
pulling tourists to Singapore,
although the Singapore
operation is unlikely to
recover back to its PATMI
of more than S$500 mln
achieved between FY2012 and
FY2014 due to the gaming
industry slowdown and
increased competition.”
Technical Analysis
of Genting Singapore PLC
Listed on the Singapore Stock Exchange in
Dec 2005, Genting Singapore PLC’s share
price meandered around its listing price
for a year before it gaining significantly
to above S$1 when it was awarded
the Sentosa Integrated Resort project.
However, the disposal of Genting Stanley’s
betting operations and the increased in
gaming duty rate by the UK government in
2007 accompanied with the 2008 US-led
global financial crisis saw its share price fall
all the way to its listing price. In 2010, its
sterling performance in the first full quarter
of results was well received, causing its
share price to rise by 176% to a historic
high. With 2011 clouded by uncertainty in
the global economy, it has since fallen into
a descending price channel. Its rebound
from the lower boundary in late 2012 was
due to the winning of state tender for the
first hotel development in Jurong. Its weekly
MACD has been indecisive for a long while.
Source: Capital Dynamics
available for sale financial
assets (partly offset by a
S$144 mln exchange gain)
and a S$103 mln property
tax refund. Hence,
i
Capital
expects 2015 results to
be Genting SP’s worst
performance since 2011.
i
Capital expects Genting SP
to recognise lower allowance
for doubtful debt in FY2016
and FY2017, and PATMI after
perpetual securities should
exceed S$300 mln annually
after FY2018.
Conclusion
At a price of S$0.68 per
share, Genting Singapore
PLC is capitalised at S$8.22
bln. What do investors get in
return for this ?
Genting SP has many
unique propositions such
as its flagship project in
Singapore, its recent launch
of GHJ and its upcoming
RWJ project in South Korea.
The receivables profile is
improving and we reckon
that RWS is capable of
pulling tourists to Singapore,
although the Singapore
operation is unlikely to
recover back to its PATMI
of more than S$500 mln
achieved between FY2012
and FY2014, due to the
gaming industry slowdown
and increased competition.
We see the high hotel
occupancy rate and limited
casino network as their
bottlenecks. Hence,
i
Capital
rates Genting Singapore
PLC a Buy below S$0.470
which values it at 29.98 times
FY2016F P/E and 14.5 times
FY2019F P/E.
Table 1 Genting SP Receivables And Allowance For Doubtful Debts
S$ mln, FY Dec
2010
2011
2012
2013
2014
9M 2015
Allowance for doubtful debt
81.70
202.6
345.7
429.4
574.3
Past due less than 3 mths
146.3
139.6
239.1
275.9
280.3
Past due for 3-6 mths
43.30
127.2
149.3
224.6
160.3
Past due over 6 months
5.800
178.5
239.5
323.1
323.2
Past due over 12 months
0
0
0
0
101.2
Amount of due receivables
195.4
445.3
627.9
823.6
865.0
Current trade and other receivables 594.0
722.0
959.5
1116
1101
772.9
Source: Genting SP Annual Reports, Quarterly Report
B
| Stock Selections
15
Capital Dynamics Sdn Bhd
The week of 21 January – 27 January 2016
Volume 27 Number 21