Is Genting Singapore Ltd Ready For A Long Awaited Recovery?

Listed in December 2005, Genting Singapore Ltd is the developer, owner, and as well as the operator of Resorts World Sentosa in Singapore, one of the biggest integrated resort destinations in Asia. It has a casino, S.E.A Aquarium, Universal Studios Singapore theme park, Adventure Cove Waterpark, hotels, retail outlets and celebrity chef restaurants. As of 20 November 2019, Genting Singapore Ltd is worth S$ 11.45 billion in market capitalisation.

Here are 12 major things to know about Genting Singapore Ltd before investing in it:

• Revenue Breakdown 2018:
  In 2018, Genting Singapore Ltd earned 66.1% of its total revenues from gaming. The remainder of its revenue was derived primarily from hotel rooms, attractions, and other non-gaming revenues. The breakdown of its revenues are as follows:

No.	Source of Revenue	Revenue 2018(S$ Million)	Revenue 2018 (%)
1	Gaming Revenues	1,679.0	66.1%
2	Hotel Room Revenues	225.1	8.9%
3	Attraction Revenues	446.1	17.6%
4	Other Revenues	189.0	7.4%
Genting Singapore Ltd’s Total Revenue	2,539.2	100.0%

Source: Genting Singapore Ltd’s Annual Report 2018

• Segment 1: Gaming Revenues
  Since the launch of Resorts World Sentosa in 2010, gaming revenue has been declining from S$ 2.70 billion in 2011 to $ 1.68 billion in 2018.

Source: Genting Singapore Ltd’s Annual Reports

• Segment 2: Non-Gaming Revenues
  Fortunately, the decline in gaming revenue was partially offsetted by its continuous increase in non-gaming revenues which were derived from hotel rooms and attractions. Non-gaming revenues had increased from S$ 344.2 million in 2010 to S$ 834.2 million in 2018.

Source: Genting Singapore Ltd’s Annual Reports

• Group Revenues:
  Collectively, Genting Singapore Ltd has recorded a gradual decline in its group revenues from S$ 3.22 billion in 2011 to S$ 2.23 billion in 2016. It is attributable to a fall in gaming revenues during the period. Beginning in 2017, gaming revenues have stabilised at about $ 1.6 billion per year. Meanwhile, it has achieved continuous growth in its non-gaming based revenues. This has led to an increase in its group revenues to S$ 2.54 billion in 2018. 

Source: Genting Singapore Ltd’s Annual Reports

• Profitability:
  After it earned $ 1.02 billion in shareholders’ earnings in 2011, Genting Singapore Ltd has not delivered a sustained billion-dollar earnings over the last seven years. Earnings have tumbled to as low as S$ 75.2 million in 2015 due to lower gaming revenues and incurrence of fair value loss on derivative financial instruments of S$ 239.3 million in the year. Since that year, Genting Singapore Ltd’s earnings had recovered, increasing to as much as S$ 755.4 million in 2018. Since 2012, Genting Singapore Ltd has recorded below 10% in return on equity (ROE) per annum. It means that the company has made below $ 10 in earnings per year from each $ 100 it has in shareholders’ equity from 2012 to 2018.

Source: Genting Singapore Ltd’s Annual Reports

• Latest 12-Month Results
  For the past 12 months, Genting Singapore Ltd has made S$ 2.54 billion in revenues. Out of which, it had generated S$ 682.9 million in earnings or 5.67 Singapore Cents.

Period	Group Revenue (S$ ‘000)	Shareholders’ Earnings (S$ ‘000)	Earnings per Share (EPS) (Sen)
Q4 2018	664,765	150,178	1.25
Q1 2019	640,358	205,470	1.70
Q2 2019	636,760	168,409	1.40
Q3 2019	596,058	158,873	1.32
Total	2,537,941	682,930	5.67

Source: Genting Singapore Ltd’s Quarterly Reports

• Balance Sheet Strength
  In Q3 2019, Genting Singapore Ltd has S$ 535.0 million in non-current liabilities and S$ 7.90 billion in shareholders’ equity. Thus, it has 6.77% in gearing ratio. In addition, the company has reported to have S$ 3.86 billion in current assets and S$ 605.4 million in current liabilities. Thus, it has a current ratio of 6.38.
  
• Major Shareholders
  Genting Bhd, via wholly-owned subsidiary, Genting Overseas Holdings Ltd, is the largest shareholder of Genting Singapore Ltd with as much as 52.7% shareholdings of the company. Tan Sri Lim Kok Thay is the major shareholder of Genting Singapore Ltd via his stakes in Genting Bhd. Tan Sri Lim Kok Thay is the Executive Chairman of the company.
  
• Future Prospects
  As of 3 April 2019, Genting Singapore Ltd had entered into a second supplemental agreement with Sentosa Development Corporation (SDC) where it has committed to invest about S$ 4.5 billion in expanding and upgrading the current Resorts World Sentosa for a period of five years.
  
  Upon completion, it will expand the integrated resort by 50% or about 164,000 sq. m. of gross floor area (GFA) which are used for leisure and entertainment spaces. These developments would include:
  
  – Expansion of Universal Studios Singapore by adding two new theme parks namely the Minion Park and Super Nintendo World.
  
  – Expansion of S.E.A. Aquarium and it would be rebranded as Singapore Oceanium.
  
  – Conversion of the Resorts World Theatre into a new Adventure Dining Playhouse.
  
  – Expansion of in-resort accommodation up to 1,100 hotel rooms at a new waterfront lifestyle complex.
  
  – Enhancement in Water Promenade with Restaurants & Retail Outlets.
  
  – Expansion of Meetings, Incentives, Conferences and Exhibitions (MICE) facilities
  
  – Development of Driverless Transport System (DTS) which will enhance last-mile connectivity to bring greater footfall in Resorts World Sentosa and the rest of Sentosa Island. 

• P/E Ratio
  As of 20 November 2019, Genting Singapore Ltd is trading at $ 0.95 per share. Hence, based on its latest 12-month EPS, it has a current ratio of 16.75. It is meaningless to compare it with its historical P/E Ratio for its earnings generated had been volatile for the last 8-9 years.
  
• P/B Ratio
  In Q3 2019, Genting Singapore Ltd has net assets of S$ 0.655 a share. Thus, it has a current P/B Ratio of 1.45, which is close to its 5-year P/B Ratio average of 1.42 and below its 10-year P/B Ratio average of 2.20.

• Dividend Yields
  In 2018, Genting Singapore Ltd has paid out 3.5 cents in dividends per share. Thus, its dividend yield is 3.68% per annum. 

VIA’s Verdict 

After prolonged deterioration in its financial results, Genting Singapore Ltd has delivered a much needed improvement in its financial performance in both 2017 and 2018. Its balance sheet has shown that it is low-geared and has S$ 3.7 billion in cash reserves. The management has chosen to invest in the upgrading and expansion of Resorts World Sentosa for the next five years. 

That is great news for long-term investors as the management is already looking to enrich its assets for the long term.

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