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After Genting Singapore PLC’s Poor Third-Quarter Showing, What’s Next For Investors?

Genting Singapore PLC (SGX: G13) seems to have done poorly in its last-completed quarter. For the three months ended 30 September 2014, revenue fell 17% year-on-year while net profit attributable to shareholders plunged 50%.

The company owns and operates Singapore’s flagship integrated resort, Resorts World Sentosa. The tourism destination contains theme parks, retail outlets, hotels, and resorts. But more importantly, it also houses one of Singapore’s two casinos. The gaming business is very important to Genting Singapore as it accounted for more than three quarters of the company’s total revenue in 2013.

With that as a backdrop, let’s take a closer look at Genting Singapore’s latest earnings release.

The financials

Turnover for the quarter came in at S$644.8 million, down from S$776.8 million a year ago. Net profit attributable to shareholders meanwhile, fell from S$193 million to S$97.4 million. Genting Singapore’s poor showing was due to underperformance from its premium player business; the company had suffered from a low win percentage, which means that the high rollers had won more than anticipated.

For the nine months ended 30 September 2014, revenue increased 3% to S$2.2 billion but net profit attributable to shareholders slipped by 5% to S$428.2 million. The top-line growth for the nine month period came on the back of “strong performance [from] the premium player business and the higher visitor arrivals at Universal Studios Singapore.”

Gaming revenue, which formed the bulk of Genting Singapore’s total revenue (as mentioned earlier), slumped 21% year-on-year to S$477.3 million for the third quarter. But for the first nine months of 2014, it grew by 4% to S$1.7 billion.

Some operational highlights

On the non-gaming front, Genting Singapore’s hotel business saw an occupancy rate of 95%, with an average daily room rate of S$408 for the third quarter of 2014. No such figures were given in the third quarter of 2013 by the company, so comparisons can’t be made. Elsewhere, Resorts World Sentosa’s attractions remain strong as average daily visitation managed to grow 10% sequentially from the second quarter of 2014.

Future outlook

In the earnings release, Genting Singapore gave some warning on the headwinds it’s facing:

“The Asian gaming and tourism industry is experiencing significant challenges in the face of economic slowdown in our major visitor markets and other environmental factors.”

In particular, the number of high-rollers from China has shrunk due to a crackdown on corruption, which blocked large amounts of cash from leaving the country, and domestic reforms. This is something for investors to watch but it’s anybody’s guess as to how the situation might play-out eventually.

Going forward, Genting Singapore’s plans to open an integrated resort in Jeju Island in South Korea are underway, with the company in talks with the local authorities there. The company is also keen to make a bid for an integrated resort in Japan but nothing is confirmed as the debate on the Casino Promotion Bill by the Japanese legislature is still under progress.

For the past 12 months, Genting Singapore’s shares have slid by 28.5%. Comparatively, the Straits Times Index (SGX: ^STI) is up 3.5% during the same time frame. In fact, Genting Singapore’s shares had even sunk to a four-year low just last month. At its closing price of S$1.04 on Tuesday, Genting Singapore’s shares are actually right back to where they were before Resorts World Sentosa opened in 2010 – that’s emblematic of the market’s current pessimism on the company’s fortunes.

If Genting Singapore can develop and operate integrated resorts and casinos as planned in South Korea and Japan, these new ventures can provide a new impetus for growth and also help to diversify the company’s business away from Singapore. Hopefully, more optimism can return to the company in the process.

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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 Sudhan P doesn’t own shares in any companies mentioned.