Genting Corporation PLC’s Latest Earnings: What Investors Should Know

Genting Corporation PLC (SGX: G13) reported its fiscal third-quarter earnings yesterday evening. The reporting period was for 1 July 2015 to 30 September 2015.

Genting Singapore is the operator of the iconic Resorts World Sentosa integrated resort that’s located in the heart of Sentosa Island, Singapore. The resort’s attractions include the Universal Studios Singapore theme park and one of Singapore’s only two casinos.

You can learn more about the company here or catch up with the previous quarter’s earnings here.

Financial highlights

The following’s a quick rundown on Genting Singapore’s latest financial figures:

  1. Revenue for Genting Singapore was relatively flat at $636 million, coming in just 1% lower compared to a year ago. This is a positive development following a plunge in revenue recorded in the previous quarter.
  2. Net profit attributable to shareholders, though, almost halved to $66.9 million for the quarter. The majority of the fall in profit came from fair value losses recorded for its derivative financial instruments and higher other operating expenses. As part of the expense picture, Genting Singapore’s impairment loss on trade receivables (essentially the writing off of bad debts) had more than doubled from S$39.7 million a year ago to S$92.5 million.
  3. Earnings per share (EPS) was 0.31 cents in the third-quarter of 2015. This is down from the EPS of 0.79 cents that the casino operator recorded in the same quarter last year.
  4. For the third-quarter of 2015, cash flow from operations was $325 million with capital expenditures clocking in at $53.6 million. This gives Genting Singapore positive free cash flow of around $271 million, a nice improvement from the $186 million in free cash flow seen a year ago ($234 million in cash flow from operations and $48.3 million in capex).
  5. As of 30 September 2015, Genting Singapore PLC had $4.6 billion in cash and equivalents and $1.7 billion in debt. This is up from the $3.2 billion in cash and equivalents and $1.8 billion in debt that Genting Singapore had last year.

Genting Singapore had managed to keep its revenue flat for the reporting quarter. This is an improvement from the double-digit revenue declines experienced in the past two sequential quarters. Genting Singapore also maintained a healthy balance sheet and generated positive free cash flow. The one bad apple in the mix is that profit almost halved.

Notably, there are still around $496 million in assets on its balance sheet (as of 30 September 2015) which are classified as “available-for-sale” financial assets. My colleague Stanley Lim had previously expressed his concern about these assets:

Most of these assets are described as “compound financial instruments” in Genting Singapore’s annual report and very little information provided on them. Shareholders may want to try and find out more about these assets given their large market value.

The $496 million figure, though, is a sharp reduction from the $930 million recorded last quarter.

On another note, current trade and other receivables also fell from $1.1 billion at the end of 2014 to $772.9 million on 30 September 2015. Foolish readers may recall that Stanley had also cautioned about the size of Genting Singapore’s current trade receivables previously. This may be an area to watch as well.

Operational highlights

While the revenue for the quarter was relatively unchanged, the pictures with each segment was a little different when we dig into the details.

Revenue from Genting Singapore’s gaming segment fell 5% year-on-year from $477.3 million in the third-quarter of 2014 to $451 million in the third-quarter of 2015. Meanwhile, revenue from the non-gaming segment had offset the decline with a 10% year-on-year increase.

In Genting Singapore’s commentary, the management team opined that the fall in revenue was due to lower business volume in the premium gaming business. The management team said that the company has right-sized its credit extension to VIP customers in order to reduce quarterly bad debt provisions.

Elsewhere, the non-gaming segment had pulled in better figures on the back of a re-launch of the Battlestar Galactica dueling roller coasters and the introduction of Puss in Boots’ Giant Journey attraction at Universal Studios Singapore. Daily average visitation for Resorts World Sentosa’s attractions exceeded 21,000 in the reporting quarter, an increase of 17% year-on-year. The hotel businesses also recorded a healthy 88% overall occupancy rate.

Lastly, a short update was also given by the company for its Korea and Japan initiatives:

At the Group level, soil works in Resorts World Jeju are progressing as per schedule, and are almost completed. We have recently obtained our construction permit and target to commence building works by early next year. We note with optimism that the Jeju government has passed the casino ordinance. The soft opening of the initial phase of our Jeju IR is targeted for end 2017.

We are sanguine about prospects for the passage of a gaming bill in Japan allowing Integrated Resorts in Japan.

Foolish summary

At its closing price yesterday of $0.815, Genting Singapore traded at around 57.8 times trailing earnings.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.