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Genting Singapore PLC’s Latest Earnings: What’s Next After A Double-Digit Profit Decline?

Genting Singapore PLC (SGX: G13) released its fiscal fourth quarter results for the year ended 31 December 2014 yesterday.

The company’s flagship is the integrated resort, Resorts World Sentosa. Besides housing an all-important casino, RWS also has many other non-gaming attractions under its belt like Universal Studios Singapore and the newly-opened Trick Eye Museum.

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

Financial umbers

Here’s a quick read of Genting’s numbers:

  1. For the quarter, revenue dipped by 8% to S$637.9 million from a year ago. For the whole of 2014, revenue actually grew by 1% from S$2.847 billion in 2013 to S$2.862 billion.
  2. Genting Singapore’s profit for the quarter declined by 30% year-on-year to S$118.9 million. For the year, the decline was milder – profit was down 10% to S$635.2 million from a year ago.
  3. As a result of the profit decline, earnings per share (EPS) for the quarter slid by 37% from a year ago to 0.73 Singapore cents. EPS for 2014 was at 4.23 cents, down 12% from 4.82 cents in 2013.
  4. Operating cash flow came in at S$278.2 million for the quarter, nearly double the figure of S$136.4 million seen in the same period a year ago. For the whole of 2014, operating cash flow grew by 16.4% to S$955.6 million.
  5. At end-2014, Genting Singapore’s balance sheet had S$3.7 billion in cash and S$1.7 billion in borrowings. This is an improvement from a year ago with the two figures at S$3.63 billion and S$2.23 billion respectively.

So, pulling it all together, Genting Singapore has ended 2014 with a tough quarter, although some solace can be taken in the fact that the company had a stronger balance sheet and cash flows.

Genting Singapore also declared a final dividend of 1 Singapore cent per share for 2014, unchanged from the total dividend dished out for 2013.

Operational highlights

In 2014, Genting Singapore’s non-gaming business “remains strong” and its attractions in that space had pulled in more than 6 million visitors. Although, visitor numbers seemed to have dipped from 2013 when “[b]oth Marine Life Park and Universal Studios Singapore registered strong visitation of more than 6.7 million visitors in 2013,” according to the company’s 2013 annual report.

Genting Singapore also signaled in the earnings release that it’s experiencing a shift in its business environment in 2014 and had been making adjustments to its business. Here’re the company’s comments:

“The business environment around us has changed rapidly and we face stiff competition. We have adapted and innovated to stay relevant in the respective industries that we are in.

In recent months, the macro-economic ecosystem has been altered to an extent that the gaming industry has to adjust to a new norm. RWS has been reorganising its gaming programmes to focus marketing initiatives towards the foreign premium mass and mass market segments.”

Valuation and prospects

Although it hasn’t exactly been a walk in the park for Genting Singapore in 2014, investors would still have a few growth initiatives to look forward to:

1. New innovative offerings for its Attractions business.

In the second quarter of 2015, Genting Singapore has lined up  the launch of the “Puss in Boots’ Giant Journey” attraction and the “much-anticipated” return of the Battlestar Galactica dueling roller coasters. According to the company, “[t]hese launches present opportunities for us to create events to increase our revenue.”

2. Addition of yet more hotel rooms.

Genting Singapore’s new 550-room hotel in the Jurong Lake District, Genting Hotel Jurong, is expected to be opened from May 2015 onward. For some perspective, my colleague Chong Ser Jing had previously noted that Resorts World Sentosa has more than 1,500 rooms amongst its various hotels. The larger room capacity in the near future can potentially help drive more visitors to Resorts World Sentosa.

3. Construction of a second integrated resort.

Genting Singapore’s latest project, Resorts World Jeju, has finally broke ground on 12 February 2015 after having experienced delays. More details can be found here.

The new integrated resort, which is to be modelled after Resorts World Sentosa, is a joint venture between Genting Singapore and China-based real estate developer Landing International Development Ltd.

Genting Singapore is “confident that RWJ will be a magnet for the regional tourist market, where within a flying radius of 2 hours, there is a sizeable population of 750 million.” If Resorts World Jeju is a success, it can help diversify Genting Singapore’s business geographically given that the company’s only source of revenue currently is Singapore.

Based on Tuesday’s closing price of S$1.045, Genting Singapore is valued at a trailing price-to-earnings (PE) of 25 and carries a trailing-12-months dividend yield of 0.95%.

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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 James Yeo doesn’t own shares in any companies mentioned.