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

Yesterday evening, Genting Singapore PLC (SGX: G13) reported its 2016 fourth quarter and full year earnings.

As a brief background for some context later, Genting Singapore is the operator of the integrated resort, Resorts World Sentosa. Among the resort’s many attractions are one of Singapore’s two casinos and the Universal Studios Singapore theme park.

You can learn more about the company in here or catch up with the results from the previous quarter here.

Financial highlights

The following’s a rundown on some of the latest financial figures for Genting Singapore:

  1. Revenue for Genting Singapore in the fourth quarter rose 2% year-on-year to $557.7 million. For 2016, revenue was down 7% to $2.23 billion.
  2. For the reporting quarter, net profit soared to $188.9 million, up from just $21.9 million seen in the same quarter last year. For the whole of 2016, net profit was $384.5 million, almost doubling 2015’s level. The profit increase came mostly from higher other operating income, higher gross profit, and lower expenses.
  3. Earnings per share (EPS) was 1.33 cents in the fourth quarter of 2016, a reversal from the loss of 0.06 cents seen in 2015. For the full year, EPS was 2.22 cents, a big jump from 2015’s 0.62 cents.
  4. Cash flow from operations was $261.3 million for the fourth quarter while capital expenditure came in at $15.8 million. This gave Genting Singapore positive free cash flow of $254.5 million for the reporting quarter. For 2016, the casino operator logged $1.08 billion in free cash flow. 2015’s fourth quarter saw the company generate $294.3 million in free cash flow; for the whole year, free cash flow was $1.08 billion as well.
  5. As of 31 December 2016, Genting Singapore had around $4.96 billion in cash and equivalents and $1.16 billion in debt. This is an improvement from the $5.00 billion in cash and equivalents and $1.63 billion in debt that Genting Singapore had at the end of 2015.

So, Genting Singapore closed 2016 with lower revenue but a better profit. The casino operator also strengthened its already-healthy balance sheet and continued to generate positive free cash flow.

On another note, the company’s trade and other receivables (under current assets) fell from $646.4 million at the end of 2015 to $197.7 million at end-2016. In early 2015, my fellow Fool Stanley Lim had expressed his concern over the size of Genting Singapore’s trade receivables back then. A big part of the decline in the trade receivables was from an impairment of $235 million that Genting Singapore took in 2016.

Finally, the board of directors proposed a final dividend of 1.5 cents per share, unchanged from 2015.

Operational highlights

For the fourth quarter of 2016, revenue from Genting Singapore’s Gaming segment rose 7% from $374 million in the fourth-quarter of 2015 to $398.6 million. For the full year, the Gaming segment’s revenue was down 9% to $1.6 billion.

Elsewhere, Non-gaming revenue recorded an 8% year-on-year decline for the fourth quarter of 2016 to end at $158.5 million. The segment recorded $637 million in revenue for 2016, down 2% from a year ago.

Future outlook

In Genting Singapore’s earnings release, the management team included the following commentary on the quarter and its future:

“With ongoing uncertainty in the macroeconomic and political environment, coupled with a difficult Asian gaming market, we continue to adopt a measured approach in the VIP gaming business.

The impairment of receivables relating to this business segment has reduced since we calibrated our credit policies and remodeled our commission structure. We have seen our profit margins improve in this segment. Coupled with our marketing focus on growing regional premium mass business, we are optimistic in delivering sustainable earnings growth.

However, with the uncertain global political setting and its attendant effect that creates a volatile exchange rate regime, our marketing programs may be negatively impacted.

The Group has completed a study of our capital structure, and over the next 3 years will execute a corporate finance strategy that fulfills our various investment requirements including IR projects, and yet maintaining an efficient capital funding model.”

The company also has its eye on Japan’s gaming market:

“In relation to the Group’s diversification plan, we are encouraged by the recent passage of the IR Promotion Bill in Japan. We continue to track the progress of the IR Execution Bill which will pave the way for the formal bidding process for Japan gaming licence. The Group has sufficient financial resources and is well placed to bid for this opportunity.”

In late 2016, Genting Singapore also entered into an agreement to sell its entire 50% stake in Landing Jeju Development, a company that is developing an integrated resort in Jeju Island, South Korea.

At its closing share price yesterday of $0.98, Genting Singapore traded at 44.1 times trailing earnings and has a dividend yield of 1.5%.

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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.