Genting Singapore PLC’s Shares Are Up By Nearly 30% In 3 Months: Here’s Why

Genting Singapore PLC (SGX: G13) has seen its stock price climb by 29% over the past three months to S$0.98 currently. Why is that so? Let’s take a look at a possible reason.

A quick introduction

Genting Singapore is likely to be a company well-known to many who live in Singapore. After all, the company is the operator of one of Singapore’s tourism landmarks, Resorts World Sentosa.

The integrated resort houses one of Singapore’s two casinos and has many other attractions, such as a bevy of hotel concepts and the Universal Studios Singapore theme park.

A difficult few years

Over the past few years, Genting Singapore has been facing a challenging business environment, which has resulted in falling revenues and profits. This in turn has led to a falling share price. Even after its recent big jump, the company’s share price is still down by nearly 40% from where it was at the start of 2012.

Source: S&P Global Market Intelligence

The table above shows Genting Singapore’s revenue and profit numbers from 2013 to 2015 which gives an idea of the difficulties the company has been experiencing.

The tide turns

In the first two quarters of 2016, Genting Singapore’s top-line and bottom-line continued falling. But, the company’s latest results – for the third-quarter of this year – showed some improvement. This could be behind the company’s higher share price over the past three months.

Despite a 9% year-on-year decline in revenue, Genting Singapore’s profit attributable to shareholders surged by 187% to S$106.9 million, resulting in a similar 187% jump in its earnings per share.

The company reported that revenue from Resorts World Sentosa in the third-quarter had grown by 21% from the second-quarter due to a “favourable performance” in the attractions and hotel business and an improved VIP rolling win percentage.

Genting Singapore’s balance sheet also strengthened. As of 30 September 2016, it has S$4.78 billion in cash and cash equivalents and just S$1.16 billion in total debt. A year ago, there was S$4.57 billion in cash and total debt of S$1.63 billion.

The road ahead

Genting Singapore has clearly delivered a better set of results in the third-quarter of 2016 as compared to the last few quarters. And given Genting Singapore’s strong share price gains over the past three months, investors have clearly become more optimistic over the company’s prospects.

But this raises the question: Is the company’s turnaround a short-lived phenomenon or something that would be sustained over the longer-term? Unfortunately, there is no straight forward answer.

On the positive side of things, the company has improved its efficiency, reduced its bad debt provisions, lessened its reliance on its VIP gaming business, and delivered a strong performance in its attractions and hotel businesses.

On the other hand, there is still on-going uncertainty in Asia’s gaming industry and Genting Singapore’s attractions and hotel businesses are currently still much smaller than its gaming business.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.