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Genting Singapore shares dip as currency losses hit profit

Wednesday, August 5, 2015 - 18:41

[SINGAPORE] Genting Singapore Plc fell to the lowest in six years after the casino operator warned of a significant fall in second-quarter profit on derivative and currency losses, amid a downturn in gambling by mainland Chinese.

Genting Singapore dropped 8.3 per cent to 82.5 Singapore cents, the lowest close since August 2009. About 61.4 million shares changed hands, more than four times the daily average for the past three months, according to data compiled by Bloomberg. The stock slumped 24 per cent this year versus a 5.2 per cent decline for the benchmark Straits Times Index.

The profit slump is mainly due to "fair value loss on derivative financial instruments" following unfavorable market conditions and unrealized foreign-exchange translation losses, Genting Singapore, which operates the Resorts World Sentosa, said in a statement. It expects adjusted earnings before interest, taxes, depreciation and amortization for the quarter ended June 30 to be comparable with the previous three months.

"Currency headwinds has been plaguing Singapore gaming operators for quite a while from all their primary segments such as China, Indonesia and Malaysia," said Grant Govertsen, an analyst at Union Gaming Group in Macau. "That has been impacting results over the past several quarters.

Gambling revenue in Singapore and Macau has slumped as Chinese high rollers curb spending to avoid scrutiny amid President Xi Jinping's crackdown on corruption. Genting Singapore's net income plunged 73 per cent to S$62.7 million in the three months ended March 31 as the company took a S$76.3 million impairment loss on trade receivables.

Genting Singapore's derivative financial instruments reached S$246.9 million as of end December 2014, the highest since its public listing in late 2005, according to data compiled by Bloomberg. The company declined to comment on its derivative exposure, citing a blackout period ahead of its Aug 13 earnings release.

Genting Singapore "from time to time enters into foreign exchange forward contracts" for revenue and expenses in foreign currencies, and its main exposure mainly relates to the US dollar in the last fiscal year, the company said in its 2014 annual report. The Singapore dollar has fallen 8.1 per cent versus the greenback in the year to June 2015.

Separately, Genting Hong Kong Ltd climbed 4.2 per cent after Landing International Development Ltd announced it would buy the cruise operator's 50 per cent stake in Magical Gains, an owner-operator of a casino on Korea's Jeju island. Landing closed unchanged after rising as much as 15 per cent earlier.

Genting Hong Kong's sister company Genting Singapore will remain Landing's joint venture partner on another project on the Korean island, to be named Resorts World Jeju, Landing said in a statement late Tuesday.

Marina Bay Sands, another Singapore casino resort owned by Sheldon Adelson's Las Vegas Sands Corp, reported last month adjusted property EBITDA fell 6.4 per cent in the second quarter on a constant currency basis due to a drop in rolling chip revenue. Rolling chips typically refer to high-stakes, or VIP, gambling.

Genting Singapore said it will provide more details of its financial performance when it unveils earnings on Aug 13. It said it is still finalizing its second-quarter accounts.

BLOOMBERG