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Is A Turnaround In Sight For Genting Singapore PLC?

Casino and resorts operator Genting Singapore PLC (SGX: G13) has taken its investors on a painful ride over the past five-plus years since peaking at a price of nearly S$2.40 in 2010, the year in which its flagship Resorts World Sentosa was launched.

Today, Genting Singapore’s shares are exchanging hands at S$0.75 apiece. Is there a turnaround in sight?

The beginning of the end

The gaming industry in Asia has been gravely affected partly due to the crackdown of corruption from China’s top brass. This has hurt Macau’s economy badly as well (the territory is dependent on gaming revenues), with its gross domestic product (GDP) contracting by a massive 26% in the latest reading.

Genting Singapore’s business isn’t spared from the carnage with it recording its first-ever quarterly loss in the second-quarter of 2015 since the official opening of Resorts World Sentosa.

If the signs from Macau are any hint, there may be more pain to come down the road for the company.

The light at the end of the tunnel

But there are bright spots here for Genting Singapore.

The company still has a very strong balance sheet that is flush with cash. Its total debt to equity ratio is only at 18% and it has more cash than borrowings. More important, the business is still able to generate cash flow. In the second-quarter of 2015, despite suffering a slowdown in its business environment and a loss, Genting Singapore was still able to produce S$333 million in operating cash flow.

The company’s also been proactive in looking for opportunities to grow. In the first-half of 2015, it opened a new 557-room hotel in the Jurong Lake District of Singapore so as to boost its capacity to accommodate revellers and potential gaming clients. Meanwhile, it also has plans to build a new integrated resort in Jeju Island, South Korea, with construction expected to start early in 2016.

Genting Singapore’s strong balance sheet, cash-generative businesses, and growth plans may give it the resources needed to weather the current storm and perhaps even come out ahead when the clouds clear.

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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 does not own shares in the companies mentioned above.