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Genting Singapore outlook raises bets against the house

SINGAPORE — Analysts are the least optimistic about Genting Singapore in a year as slumping casino revenue from high-rollers curbs earnings prospects for the second-worst-performing stock on the Straits Times Index.

Genting is still down 23 per cent this year as casino receipts tumbled on a slump in Chinese visitors. TODAY FILE PHOTO

Genting is still down 23 per cent this year as casino receipts tumbled on a slump in Chinese visitors. TODAY FILE PHOTO

SINGAPORE — Analysts are the least optimistic about Genting Singapore in a year as slumping casino revenue from high-rollers curbs earnings prospects for the second-worst-performing stock on the Straits Times Index.

The difference between Genting’s share price and analysts’ predictions for where it will be in 12 months narrowed on Wednesday to the least since December last year, based on data compiled by Bloomberg. Twelve-month average price targets dropped to S$1.24 from S$1.55 a year ago, compared with a closing price of S$1.155 on Wednesday. While more than half of analysts still have buy ratings, at least nine of the 21 covering the stock cut forecasts after the casino operator this month reported a 50 per cent plunge in quarterly profit.

A 12 per cent rally in the stock since the start of a share buyback on Nov 13 will be short-lived, said CLSA Asia Pacific Markets. Genting is still down 23 per cent this year as casino receipts tumbled on a slump in Chinese visitors, the biggest source of revenue.

“It’s good that Genting is returning cash to shareholders but the scale of the buyback is too small to have a meaningful impact,” Mr Richard Huang, an analyst at CLSA in Hong Kong, said. “The company won’t have very exciting growth for the next few years because casino revenue in Singapore isn’t growing and the new casino projects in South Korea and Japan haven’t started.”

When announcing quarterly results on Nov 11, Genting said it and partner Landing International Development are waiting for government approval to start building their proposed US$2.2 billion (S$2.9 billion) casino resort on South Korea’s Jeju Island. The firm is also waiting for Japan’s decision on whether to allow casinos.

Genting was authorised by shareholders to repurchase as much as 1.22 billion shares — or 10 per cent of its outstanding stock — in April. The company started the programme only on Nov 13, a day after the shares sank to a four-year low. From then until Wednesday, the company spent S$63.8 million buying back 58.6 million shares, the latest regulatory filings show. “They think the share price is too cheap. In the long term, the house will always win,” said Mr Sam Le Cornu, senior portfolio manager at Macquarie Funds.

Genting’s third-quarter net income dropped to S$97.4 million from S$193 million a year earlier. Although it may be too early to conclude that earnings have bottomed out in the third quarter, growth will be stable in the coming quarters, supported by increasing mass-gaming market revenue and the opening of Genting’s new hotel in Singapore, said Maybank Kim Eng. Genting has announced that the 550-room hotel in Jurong will open in the second quarter of next year.

“We’re going to see very steady earnings growth going forward,” Mr Samuel Yin, an analyst at Maybank Kim Eng said. “The mass-gaming market is still growing.”

The continuing weakness in the VIP gaming segment, which is being dragged by the slowing economic growth in China and the government’s anti-corruption campaign, will offset improvements in the mass gaming market, said Mr Huang from CLSA.

Mr Alan Richardson, an investment manager at Samsung Asset Management said: “For the foreseeable future, the profitability of the business will still deteriorate. It could take a while before fundamentals actually start to turn.” BLOOMBERG

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