Should Investors Be Excited About Genting Hong Kong Limited (Malaysia)’s Big Surge in Earnings?

Superstar-virgo-shipCruise ship operator Genting Hong Kong Limited (Malaysia) (SGX: S21) issued its second quarter results over the weekend. For those who are unaware, Genting Hong Kong achieved an 840% year-on-year increase in its net profit to US$216.7 million for the first half of 2014.

Yet, its share price has remained the same today as compared to last Friday’s close. What is happening?

The wisdom of investors

As it turns out, the market might be right – there is not much to be excited about as a huge part of Genting Hong Kong’s gain came from the disposal of 7.5 million shares of its associate Norwegian Cruise Line Holdings Ltd. All told, the sale resulted in a gain of US$152.6 million for Genting Hong Kong.

In terms of its operating businesses, Genting Hong Kong did not fare as well: it recorded an operating loss of US$21.3 million for the first half of 2014. That’s a step backward from the operating loss of US$15 million that was recorded in the corresponding period a year ago and had come about mainly due to an increase in operating expenses which climbed from US$232.8 million to US$261.4 million.

On a positive note

There is some good news from the results though. Genting Hong Kong’s share of profit of its associates had turned around strongly to a profit of US$74.6 million from a loss of US$44.0 million a year ago. This was mainly due to Norwegian Cruise Line Holdings reversing its losses in the previous year. Genting Hong Kong’s other associate, Travellers, which manages the Resorts World Manila, improved its earnings by 4.5% to US$27.8 million.

Growth conitnues

Another piece of good news comes in the form of Genting Hong Kong’s strong growth potential for each of its operating segments. Star Cruise is still planning to expand its fleet, with two vessels on order. Meanwhile, Norwegian Cruise Line has also ordered another four vessels for its own expansion plan.

In the Philippines, Resorts World Manila is starting work on its Phase Three projects which would see it add two more hotels to its integrated resort.

Foolish Summary

Although it’s probably true that investors shouldn’t get too excited about Genting Hong Kong’s seemingly huge jump in profit, the company might still possess a strong ability to grow its profit in the future if all the expansions in its different segments bears fruit.

Of course, there’s nothing certain in the world of investing, but Genting Hong Kong’s corporate future might be worth watching.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.