Genting Singapore PLC Has Lost 10% In A Month: What’s Happening?

Genting Singapore

Nothing seems to be going in favour for Genting Singapore PLC (SGX: G13) in August. Month-to-date, the company has already lost some 10% of its market value at its current price of S$1.22. What is happening?

Slowing growth?

Investors are starting to worry about Genting Singapore’s ability to continue growing its business. It seems that the slowing Chinese economy and the fear of flying due to the recent tragic accidents with flights MH17 and MH370 has dampened Chinese tourists’ interest in visiting Singapore. In fact, The Edge reported that the number of Chinese visitors to Singapore has dropped about 27% year-to-date compared to a year ago.

On the part of Genting Singapore, the company has also seen a 22% year-on-year decline in its quarterly profit for the second quarter of 2014.

Is there any long-term growth?

Although the near-term picture doesn’t look particularly bright as described above, Genting Singapore is paving the way for more long-term growth going forward. For instance, the company has already announced its plans to launch a S$2.5 billion joint development project with Hong Kong-listed Landing International Development Ltd in Jeju Island, South Korea. The new project is supposed to be Jeju Island’s largest tourism resort to date and would house hotels, a theme park, a shopping complex, a casino, and even residential properties.

In addition, the company is also hoping to enter the Japanese market if Japan’s Integrated Resorts Promotion Bill is passed to allow casinos to operate in the country.

What are the risks?

All these plans are not without risks. The most obvious one is that the bill in Japan does not pass – this would basically destroy any hopes of Genting Singapore being able to participate in the growth of Japan’s gaming industry.

With respect to its plans in South Korea, there’s also stiff competition. There are already 17 casinos in the country with plans for more in the future.

The least obvious risk of all is the observation that gaming taxes in Singapore are still very much lower as compared to Macau. If Macau’s level of gaming taxes is taken to be an indication of what the future might look like in Singapore, then Genting Singapore would see a much larger chunk of its future earnings flow into government coffers in the form of taxes.

Foolish Summary

Even after the 10% drop, Genting Singapore continues to trade at 22 times trailing earnings and 2 times its book value. So the question remains: Is Genting Singapore positioned for a rebound after the huge drop this month, or have market expectations run ahead of itself these past few years with a slow return to reality taking place now?

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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.