Is There More Pain Ahead For Genting Singapore PLC?

Genting Singapore PLC (SGX: G13) was a great performing stock from 2006 to 2011, gaining slightly over 300% in price. But, the company seems to have lost its charm with investors.

Shares of Genting Singapore, which peaked at S$2.34 in late 2010, are now trading at just S$0.68, a plunge of over 70%.

Genting Singapore, which derives most of its revenue from its flagship integrated resort in Singapore, the Resorts World Sentosa, has seen both its revenue and profit decline drastically in recent times. For the first nine-months of 2015, Genting Singapore saw its revenue and net profit fall by 17% and 67%, respectively, compared to a year ago.

Unfortunately, it seems like the worst might not be over yet for the resort operator.

Data from casinos in Macau has painted 2015 as a terrible year for them, with gaming revenue from the VIP segment falling by 40% compared to 2014 . Things are bad as well for the mass market gaming segment in Macau, with revenue there dropping by 26%.

All these had led to a 34% decline in gross revenue in 2015 for the gaming industry in Macau. The sharp fall is likely due mainly to the crackdown on corruption in China and the economic slowdown in the region. According to a news article, Macau’s gaming industry had just experienced its largest decline in 2015 since its liberalization back in 2003.

Given that Genting Singapore directly competes with gaming operators in Macau and serves similar clientele, the situation in Macau might be an indicator of what is to come for the company.

That said, while its revenue and profitability might be affected in the short-term, Genting Singapore should be well positioned to weather through the storm.

The company continues to generate strong free cash flow (some S$793 million in the first nine months of 2015) and has a strong balance sheet with a net cash position of about S$3.0 billion. With this in mind, is Genting Singapore’s dwindling share price an opportunity for investors? That may be something worth thinking about.

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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 writer Stanley Lim doesn’t own shares in any companies mentioned.