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Why Has Genting Singapore Ltd’s Share Price Plunged 20% in the Last 6 Months?

Genting Singapore Ltd (SGX: G13) 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.

In the last six months though, Genting Singapore’s stock price has declined by 20%. In this article, I’ll try to understand what might have caused the decline.

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The culprit

There are many reasons that cause share prices to move. Generally, stock price movement is driven either by business performance or investor sentiment. The former is related to how a business performs in a given period, looking at metrics like growth, margins, production, and others. Here, the ultimate driver is profit. The latter is driven more by investors’ overall mood, which is described by emotional pairs such as greed and fear, optimism and pessimism, bullish and bearish, etc.

In the case of Genting Singapore, I believe both factors contributed towards the recent decline in its share price.

Let’s start with some numbers. For the quarter ended 30 June 2019, Genting Singapore reported a 5% decline in net profit to S$168.4 million. Moreover, the decline would have been worse if not for the high-rolling win percentage in the VIP rolling business segment at Resorts World Sentosa.

On a normalised basis, the company would have generated adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA) of approximately S$230 million, a decline of 20%.

Moreover, the overall outlook for the company might remains challenging in the near term. Here’s what the company said in its latest earnings release:

“……The underlying revenue drivers have been impacted by various factors that will continue to affect our business through the rest of this year. We maintain our cautious stance on the premium segment as the regional economic environment faces uncertainty and will impact consumer confidence.”

In other words, investor sentiment for the company would, understandably, be negative given all these challenges ahead.

Conclusion

All in all, Genting Singapore’s profitability has been impacted by the increasingly challenging operating environment, which is expected to last in the near future. Thus, putting both factors together, its share price has declined by about 20% in the last six months.

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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.