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Would Peter Lynch Buy Genting Singapore?

Have you seen the streams of people waiting patiently to board the monorail service that runs between VivoCity and Beach Station? The wait can be exasperating at times. But that could just be my little bugbear.

Others, such as Peter Lynch, could see the streams of people waiting to get from HarbourFront to Waterfront as a sign that something special could be waiting for canny investors at the end of their journey.

Waterfront, which is home to Resort World Sentosa, is the brainchild of Genting Singapore (SGX: G13). Since the start of the Millennium, shares in the company that operate the integrated resort have increased nearly fivefold. That equates to an annual total return of 11.4%. Spotting potential five-baggers is one of Peter Lynch’s fortes. But what would the growth maestro make of the company now.

Genting Singapore is currently valued at 20 times historic earnings. That is not overly expensive in the grand scheme of things. In the last five years, the shares have been valued as much as 50 times earnings.

However, earnings have not exactly been growing at the rate of knots. Over the last couple of years, bottom-line profits have only grown 4% a year. That puts the shares on a Price-to-Earnings-to-Growth (PEG) rating of 5, which is unlikely to excite Peter Lynch. he would like to see a PEG ratio closer to one.

That said, Lynch could be impressed by Genting Singapore’s low level of borrowing compared to shareholder equity. Whilst the company does have S$1.9b of net debt on its books, it only represents about a-fifth of shareholder equity. Additionally, with nearly S$4.6b of cash lying around, Genting Singapore is sitting on net cash rather than net debt.

The casino operator also pays a dividend, which is likely to please Peter Lynch too. The payout is a modest $0.01 cent per shares, which equates to a dividend yield of 0.9%, based on the current share price of $1.10.The payout ratio is an undemanding 30%. With plenty left in the tank, Genting Singapore could easily lift its payout, if it wants to.

On balance, Genting Singapore looks solid. However, Lynch would want something more than just “solid”. Peter Lynch would want to see signs of strong growth and it is hard to envision where that is likely to come from, unless something changes.

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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 Director David Kuo doesn’t own shares in any companies mentioned.