Genting Singapore Ltd (SGX: G13) is an integrated gaming resort developer best known for its flagship Resorts World Sentosa integrated resort in Singapore, which is one of the largest fully integrated destination resorts in Southeast Asia.
Genting completed construction of its Resorts World integrated resort (IR) back in 2010 and has, over the years, held a strong reputation for providing a one-stop entertainment location for both locals and tourists. The IR consists of a casino, Universal Studios Singapore theme park, hotels, and a Marine Life Park attraction.
Recently, the group announced a planned renewal and refresh of its IR at a total cost of S$4.5 billion over an expected period of five years. This plan will expand the existing IR by 50% and also add additional attractions and space for meetings, incentives, conventions, and exhibitions (MICE).
Should investors take a bet on Genting’s future? Let’s have a glance at three key aspects of the group.
Financials and margins
Genting has not managed to grow its revenue over the last five years, as it has only one IR (its key asset), and visitor numbers have been stable. Gross profit, however, has improved over the years thanks to better cost control. Net profit has also similarly trended upwards over time to hit a five-year high of S$755.4 million in FY 2018. Gross and net profit margins are also very impressive at 45% and 30%, respectively.
Free cash flow
Genting has a strong track record of free-cash-flow (FCF) generation. FCF has been consistently positive over the last five years, and this is a testament to Genting’s strong business model and reputation in being able to attract a steady stream of visitors to its IR. Capital expenditure requirements are negligible, thus allowing the group to continue to accumulate cash in its coffers.
Genting has demonstrated an increasing dividend payment trend over the last five years. Starting off with just S$0.01 in FY 2014, dividends have more than tripled to 3.5 Singapore cents in both FY 2017 and FY 2018. The group is willing to increase its dividend payments as it generates excess cash that it doesn’t require, and investors should cheer this move as Genting qualifies as a great source of increasing dividends.
The Foolish bottom line
Genting has demonstrated its ability to improve its margins over time, even though revenue has been relatively stagnant over the last five years. With a strong track record of FCF generation and increasing dividends, investors should definitely look to owning the group. With plans to expand the IR further, investors could also see rising revenue and profit in the future.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.