Foolish Face-Off: Genting Singapore PLC Versus Genting Hong Kong Ltd

There are around 700 companies listed on the stock exchange in Singapore. Of those, there are a number of companies that have similar business operations. It is sometimes hard to determine which company in a particular industry is better than its peers.

In this article, we will make some quick-and-dirty comparisons between two companies operating in the leisure industry, Genting Singapore PLC (SGX: G13) and Genting Hong Kong Ltd (SGX: S21), to determine which might give you more bang for your buck.

Introducing the Contenders

Genting Singapore became the first operator of an integrated resort in Singapore when Resorts World Sentosa opened for business in 2010. The destination resort offers a casino, a waterpark, an aquarium, the signature Universal Studios Singapore theme park, hotels, and retail outlets.

Meanwhile, Genting Hong Kong operates passenger cruise ships under the Genting Cruise Lines brand comprising of Star Cruises, Dream Cruises, and Crystal Cruises. It also manages the well-known nightclub Zouk, and Resorts World Manila.

The table below shows the market capitalisation and revenue for the two firms. Market capitalisation is as at the closing prices on 20 December 2017.

Do note that all figures quoted in the tables that follow are for the full year ended 31 December 2016 (FY2016) for both companies, unless otherwise stated.

  Genting Singapore Genting Hong Kong
Market Capitalisation S$16.0 billion US$1.91 billion
Revenue S$2.23 billion US$1.02 billion

Round 1: Profitability

In the first round, we will analyse the profitability of the companies in terms of net margin and Return on Equity (ROE). The ROE figure reveals how efficient the management is in turning every dollar of shareholders’ capital into profits.

  Genting Singapore Genting Hong Kong
Net Margin 12.0% -49.4%
ROE 2.8% -10.5%

Genting Hong Kong had a loss of US$502.3 million for FY2016. Therefore, the net margin and ROE figures are both negative figures. Genting Singapore fared better than Genting Hong Kong by turning in a net profit for the year though.

Winner: Genting Singapore.

Round 2: Growth

In the second round, we will compare the compounded annual growth rate (CAGR) of revenue, net profit and dividend of the two firms for the past five financial years. Companies that can grow their sales and profits steadily over time should also see their share price rise.

  Genting Singapore Genting Hong Kong
Revenue CAGR -6.8% 18.2%
Net Profit CAGR -17.9% N/M
Dividend CAGR 10.7% N/M

Genting Singapore has a negative revenue and net profit growth since the top line and bottom line were on a decline.

Genting Hong Kong’s net profit growth is not meaningful (N/M) since it had a loss in FY2016. As for its dividend, it did not dole out any cash to shareholders in FY2012 but paid out 1.0 US cent per share in FY2016. Therefore, there’s no growth to speak of.

Winner: Genting Singapore, due to the presence of profit and dividend growth.

Round 3: Valuation

As Foolish investors, it is essential to focus on the value of the business and not on the daily changes in the stock price.

We will now compare the price-to-earnings (PE) ratio, price-to-sales (PS) ratio and dividend yield of the two companies. The values below are as at the closing prices on 20 December 2017.

  Genting Singapore Genting Hong Kong
PE Ratio 60.2 N/M
PS Ratio 7.2 1.9
Dividend Yield 2.3% 4.4%
Share Price S$1.33 US$0.225

Even though Genting Hong Kong had a loss-making FY2016, it has a lower PS ratio and higher dividend yield than Genting Singapore.

Winner: Genting Hong Kong.

The Foolish Bottom Line

Final Score: 2-1 to Genting Singapore, as it has triumphed over its counterpart in two out of the three rounds.

Even though Genting Singapore has emerged victorious, I am concerned about its declining revenue and net profit. We have also yet to look at other important aspects of the companies such as the balance sheet strength, free cash flow situation, future growth prospects, and so on.

Potential investors interested in Genting Singapore should research more on the company before investing their money. This simple exercise would help to take some heavy-lifting off your back though.

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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 Sudhan P doesn’t own shares in any companies mentioned.