Genting S’pore’s FY18 results fall below expectations amidst higher costs in 4Q

KUALA LUMPUR: Genting Bhd’s (Genting) subsidiary, Genting Singapore has fallen behind expectations as its profit after tax and minority interest (PATAMI) figure of S$755 million for FY18 met only 94 per cent of consensus full-year estimates.

Inacompanyupdate,theresearch arm of Affin Hwang Investment Bank Bhd (AffinHwang Capital) detailed that Genting Singapore’ PATAMI was a significant +18 per cent year over year (y-o-y) increase, but the gains were limited by a significantly higher impairment on its trade receivables for the fourth quarter of financial year 2018 (4QFY18) at S$36 million, a huge jump from S$13 million in 3QFY18.

“Management has guided that the increase should be view as a blip and would normalise in the coming quarters.

“We believe that management would continue with its credit policy, as it has helped Genting Singapore to regain some market share in the VIP segment.

“The trade receivables still at a manageable level at S$144 million, relative to its peak of S$1,209 million in 1Q14,” said the update report.

Additionally, Genting’s management has also taken a prudent approach to determine the useful life of its assets as Resort World Sentosa (RWS) will be undergoing a major redevelopment soon.

Due to this exercise, the increase in the recorded depreciation in 4Q18 was substantial at S$104 million, a 57.7 per cent increase q-o-q and a 40.3 per cent increase y-o-y.

“We believe that the depreciation is likely to maintain at this elevated level for the next two years, as management is expecting the announce details of the redevelopment by 1H19,” said the research arm.

On a separate note regarding the outcome of the Japan Integrated Resorts (IR) bid, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) reports that so far, it is still too early to gauge the potential outcome of the bidding process which is expected to take place in 2H19.

Currently, the Japanese Diet enacted the IR implementation Bill last July and three prefectures – Osaka, Wakayama and Nagasaki – have plans to host casino resorts.

“According to news reports, there are 17 international IR operators indicating their interest to bid for one of the three IR license in Japan,” said the research arm.

For now, both research houses maintain their calls and estimates on Genting, pending the release of its 4Q18 results.

Since the Japanese Diet enacted the IR Implementation Bill last July, so far three prefectures, namely Osaka, Wakayama and Nagasaki have plans to apply to host casino resorts.

Genting Singapore has registered companies in Osaka and Yokohama and raised 20 billion yen of Samurai Bond in October 2017.

According to news reports, there are 17 international IR operators indicating their interest to bid for one of the three IR license in Japan.

For now, it is still too early to gauge the potential outcome of the bidding process which expected to take place in 2H19.

Meanwhile, management is cautious over the Singaporean market in 2019 given the uncertainty of economic environment, although business volume has seen improvement for nearly two years and should be sustainable.