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Can RWS Shake Off Its Bad Luck?
Tradeable, Tradeable Ideas | 28 August 2014
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By: Raymond Leung
Articles (142) Profile
  1. Despite strong headwinds, Genting SP managed to report better revenue for 2Q14. Revenue grew 6 percent to hit $751 million.
  2. Genting SP is looking forward to a new hotel opening in Jurong in 2Q15. Its development plans for Jeju island in Korea is also on track.
  3. A possible upside might come from Genting’s bid for integrated resorts in Japan. It is already eyeing sites in Tokyo, Osaka and Okinawa.

Analysts' updates on Genting SP

In the recent quarter, revenue for Genting Singapore (GENS) grew despite the strong headwinds faced by Resort World Sentosa (RWS). Revenue for 2Q14 was up by 6 percent year on year (YoY) from $707.9 million to $751 million.

However, net profit for GENS continued to languish as net profit fell by 27 percent YoY to $102.3 million. Profit for the group was dragged down by enlarged operating expenses with other operating expenses being the most significant (64.5 times of 2Q13).

In the year-to-date, net profit for 1H14 performed better than the last with an increase of 29 percent. This could signify a gradual turnaround from the poor FY2013.

VIP volume for 1H14 increased by 14.7 percent while the hold rate (the amount of winnings the casino makes per game) increased to 3 percent from 2.3 percent last year. However, this 3 percent is still lower than the hold rate that was projected by GENS during IPO.

RWS's house win (hold) rates continue to languish below Genting's IPO expectations.

Overall, RWS’s VIP segment continues to be weak with a low hold percentage and strong competition from Marina Bay Sands. Meanwhile, its mass market segment continued its flattish performance the last quarter.

Looking forward, GENS’s new hotel in Jurong is on schedule to open in 2Q15. Development plans in Jeju Island, South Korea, for a 50:50 owned joint venture with a Chinese partner is well on progress. Construction for the Korean integrated resort is expected to begin in 1Q15.

Management of GENS expects its operating environment to remain challenging as its core market faces strong headwinds. However, a possible upside may come from the group’s bid for integrated resorts in Japan.

GENS is eyeing sites in Tokyo, Osaka and Okinawa with a local partner but have dismissed rumors of a possible collaboration with Universal Studios Japan.

In view of its future developments, analysts from Hong Leong Research are positive on GENS and expect a possible upside of 23.7 percent.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

Genting Singapore  0.900 -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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