Is Genting Singapore Worth An Investment?

If you have come to Singapore, then going to Resort World Sentosa is definitely one of the sites you are recommended to visit. The famous integrated resort is owned and operated by Genting Singapore PLC (SGX:G13). Genting Singapore is a Singapore-listed casino and integrated resorts owner and operator. It is one of two casino/ integrated resort owners in Singapore, the other being Marina Bay Sands. This means Genting Singapore is part of a duopoly in the Singapore’s gaming industry. This puts it in an advantageous position.

Genting Singapore is a subsidiary of Genting Berhad (KLSE: GENTING), a conglomerate listed on the Malaysian Stock Exchange.

Here are 7 things you need to know about Genting Singapore.

  1. Stock Information

1

TICKER SYMBOL: SGX:G13

MARKET CAP: S$13.8 billion (18th May 2017)

SECTOR: Tourism

INDUSTRY: Gaming

  1. The Business

Genting Singapore is one of the key constituent stocks in the Straits Times Index. In Singapore, it runs a casino, tourist assets and hotels. Its flagship asset is the Resorts World Sentosa, the S$6.6 billion integrated resort located in Sentosa island. It was launched in 2010 and cost approximately S$ 5 billion to build.  Its assets are made up of tourist attractions such as Universal Studios and SEA Aquarium which are located at Resorts World Sentosa (RWS). It also runs seven hotels, with six located in RWS and one located at Jurong.

For the year ending December 2016, Genting Singapore had revenue of S$2.23 billion. Its gaming business contributed S$1.59 billion in revenue while its non-gaming business contributed S$637.5 million.  Net profit clocked in at S$384.5 million for the year.  Its five-year revenue growth rate stands at -7.1% while net income growth rate is -17.8%.

  1. Key Opportunities

Singapore as a tourist destination

Singapore has been attracting millions of tourists every year. It is also well known for its tourist attractions. Being one of two casino/integrated resorts puts Genting in a sweet spot to capture much of the gaming business in Singapore. Being one of the most recognized and prominent tourist attractions in Singapore, tourists are bound to step foot on RWS for one reason or another. This gives the company a natural competitive advantage.

Since starting in 2010, Genting has attracted millions of visitors with the Universal Studios clocking more than 25 million visitors and SEA Aquarium clocking more than 10 million till date.

One important aspect to keep visitors coming back is to ensure that Genting Singapore maintains its attractions and puts up new ones. On this front Genting has done quite well, one example would be the SEA Aquarium. Moving forward Genting announced that it is going to build a Maritime Experiential Museum which will be Asia’s only maritime silk road themed edutainment institution. This should allow it to attract more tourists going forward.

Expansion to Japan

Genting Singapore is very keen to expand out of Singapore and one destination it is eyeing is Japan. In Japan, it hopes to replicate its integrate resort (IR) model that has been wildly successful in Singapore.

In Japan, the IR promotion bill was passed towards the end of 2016 which paves the way to potentially start the first Integrated resort in Japan. Genting Singapore has even sold off its stake in its development in South Korea to concentrate its effort in bidding for the IR project in Japan. While this might have a long gestation period, if Genting can pull of what it did in Singapore, the potential of Japan could give it a very strong position for its long-term growth.

Strong Balance Sheet

In addition, Genting has a very strong balance sheet. At end of 2016, it had S$1.16 billion in borrowings and S$ 4.96 billion in Cash and equivalence. This put it comfortably in a net cash position to the tune of S$3.8 billion. A strong balance sheet is important as it allows the company to tide through difficult periods such as a recession without having to take on too much debt to survive. Investors should note however, that it has S$2.3 billion in perpetual securities on its balance sheet as well, which can be counted as a form of borrowing to its equity shareholders. Even so, the company is still very much in the net cash position, giving it strong firepower to expand in future projects.

  1. Key Risks

 Poor economic environment

The ongoing uncertainty in the macroeconomic and political environment, coupled with a difficult Asian gaming market have affected Genting Singapore for the last couple of quarters. Genting saw a big drop in the number of tourists in its VIP gaming business. While it is trying to adapt to the changing economic environment by focusing on premium mass gaming business, but this segment has yet to show it can take over the reins from the highly profitable VIP gaming business it used to run.

Competition with other destinations

As mentioned previously, Genting Singapore in heavily reliant on the Tourist dollar for its business. If for some reason, Singapore loses its appeal as a tourist destination in the future this might be cause for concern. Another concern will be if Genting’s new attractions don’t appeal to tourist anymore. There are many other tourist attractions in Singapore such as the Singapore Flyer, Gardens by the Bay and others, these attractions pose a threat to Genting Singapore if they are more appealing to tourist.

Within Asia, Singapore also has to compete with neighboring countries for tourist visits. In recent years, other destinations, such as Japan and Korea, have been gaining in popularity and competition for tourist dollar has been increasing.

  1. Valuation

Genting Singapore currently trades at a Price to Earnings (PE) ratio of 49  and provides a 2.76%  dividend yield for its investors. That is below its average 5-year valuation of 65 times its earnings with a 1.4% dividend yield.

  1. Investor Relations

Investor Relation Material:

For Investor Enquiries
ir@gentingsingapore.com

Address:

10 Sentosa Gateway,

Resorts World Sentosa,

Singapore 098270

Tel: +65 6577 8888

Fax: +65 6577 8890

  1. Top Shareholders (31stDec 2016)

  • Genting Overseas Holdings Limited – 52.8%
  • Citibank Nominees Singapore Pte Ltd – 9.46%
  • DBS Nominees Pte Ltd – 4.78%
  1. Financials

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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Ketz’s personal capacity. It does not in any way represent those of his employer and other related entities. Stanley Lim does not own any companies mentioned.

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