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Why It’s Hard To Ignore Genting Singapore
Corporate Digest | 03 April 2014
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By: Louis Kent Lee
Articles (199) Profile

Try being at harbourfront station on the weekends, and you’d have noticed the high human traffic going towards Sentosa.

And what is in Sentosa? That’s right, Resort World Sentosa (RWS), which is Genting Singapore’s (Genting) flagship project.

RWS boasts a suite of popular tourists’ attractions such as Universal Studios, S.E.A Aquarium, and its majestic casino.

Genting is among one of the only two integrated resorts with casinos licensed to operate in the lion city.

Genting has seen its stock price go through roller coaster type movements, where it was recently seen trading near the region of the low of 2013 ($1.29).

Ever wondered if its stock price movements are justified? Let us take a look at the key investment merits and risks on Genting.

    Investment Merits

  • One of the two only licensed integrated resorts with casinos in Singapore
  • Strong cash position on its balance sheet (38.45% relative to total assets size)
  • Strong liquidity (low gearing, high interest cover)
  • Highest net income margin among gaming peers (Genting Vs Melco Crown Entertainment Vs Las Vegas Sands)
  • Obtained approval for its Integrated resort JV with Landing International in Jeju island
  • Integrated resort Joint Venture (JV) in Jeju island is of close proximities to Japan and China, which will serve as a destination to attract VIP players from these two regions

    Investment Risks

  • Change in government legislations to tighten rules related to Singaporeans visiting the two casinos in the lion city
  • Single digit return on equity figure compared to its gaming peers
  • Significant appreciation of the Singapore dollar could put a dampener on spending by foreign patrons/gamers
  • Over reliance of VIP gaming revenue (57% of total gaming revenue), any shifts or slowdown from this pool will have a big impact on overall gaming revenue

SI Research Takeaway
It is true that any change in legislations by our government on the issue relating to casinos and gambling, can hurt Genting’s eventual bottom line.

However, to be honest, the growth potentials packed in Genting are quite hard to ignore.

Not only did Genting stand out among its gaming peers in terms of net income margin for FY13, its average net income margin over the past three years also puts it at the top of its pack.

Also, its strong cash position enables it to completely pay off its long term debt (if need be), or fund more strategic acquisitions, like the Jeju island JV.

The value of the Integrated resort in Jeju island (when it’s fully up and running), is really the close proximities to Japan and China.

The additional stream of VIP players that will be attracted to fuel Genting’s integrated resort in Jeju island will add more contribution ammo from this pool of patrons, which makes up more than half its gaming revenues currently.

In the grand scheme of things, we are looking at a handful of catalysts waiting to be unlocked. But when the time comes, I hope you’re smiling with gains.

Louis is a qualified accountant with the ACCA, and is the Research Editor at Shares Investment magazine.

Please click here for more information about this author.

Genting Singapore  0.920 +0.005 +0.55%   
Business: Develops, operates & mkts casinos & IRs globally, including Australia, M'sia, Philippines & UK. [FY18 Turnover] Gaming (66.1%), non-gaming (33.8%), others & invs (0.1%).

Insight: May-19, 1Q19, despite Co's non-gaming business reg... Read More

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