2 Sectors That Are In Trouble And 1 Big Investing Difference

Wilfred Wong, the new president of Sands China Ltd, one of the largest casino operators in Macau, seems optimistic about the future of the Asian gaming hub. In an interview with Bloomberg News, Wong said that the gaming industry there looks set for a recovery this year.

This comes after Macau’s gaming industry had enjoyed what Wong thinks was a “satisfying performance” in the Chinese New Year period earlier in February.

Singapore-listed casino and resort operator Genting Singapore PLC (SGX: G13) recently released its fourth-quarter earnings. The company, which counts the Singapore-based integrated resort Resorts World Sentosa as its main asset at the moment, posted a negative profit attributable to its shareholders for the quarter.

Given that the gaming industry in Macau attracts similar customers to that sought by Genting Singapore – that is, tourists from Asia – is the potentially brighter outlook for the territory an indication that the worst is over for the company?

Unfortunately, like the current oil crisis that is on-going, there is really no solid indicators we can look at to know for sure that the storm has passed. But, there’s an important difference for investors to note when it comes to Genting Singapore and oil & gas stocks in Singapore.

Most of the oil-and-gas-related companies that are listed in Singapore are struggling under high debt levels and an inability to generate cash from their businesses.

This includes giants in the sector such as Keppel Corporation Limited (SGX: BN4) and Sembcorp Marine Ltd (SGX: S51). In fact, both companies also have the possible bankruptcy of a major customer to deal with. All these are serious risks that may severely damage oil-and-gas-related companies here if there is a prolonged slump in oil prices (as a reminder, the price of crude oil has fallen from over US$100 per barrel in mid-2014 to around US$30 today).

Genting Singapore, on the other hand, is in a totally different situation even though the gaming industry it belongs to is also currently facing serious headwinds.

The company has a strong balance sheet with a net-cash position of S$3.4 billion (meaning to say its cash exceeds debt by S$3.4 billion) and it continues to generate free cash flow, with more than S$1.0 billion produced in 2015. Even if the gaming industry continues to be weak for a long time, Genting Singapore has the resources to survive a long winter.

Foolish Summary

The slump in both the oil & gas sector and the gaming sector – as well as the results of the companies within – is a reminder that most companies cannot control their macro-economic environment.

But, the same companies can control their own finances and increase their odds of surviving through whatever storm macro-economic forces can throw at them. And, based on the numbers we’ve seen, I would think that Genting Singapore is the better-prepared company going forward.

If you'd like to receive investing insights and keep updated on the latest company and stock market news, sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

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 owns shares in Keppel Corporation Ltd.