Genting Singapore shares drop 11.6% after Q1 earnings fall

[SINGAPORE] Shares of Genting Singapore slid on Wednesday (May 13), after it reported weak first-quarter net profit on Tuesday evening.

The counter fell as much as 11.6 per cent to S$0.61 as at 3.44 pm – a S$0.08 decline – erasing about S$970 million in market capitalisation.

It was the largest decliner on the Straits Times Index on Wednesday morning.

The company posted Q1 net profit of S$65.2 million, down from S$145 million in the year-ago period. Revenue dropped 3 per cent on the year to S$607.6 million, driven by lower gaming revenue which fell 8 per cent to S$403.4 million.

The owner and operator of Resorts World Sentosa (RWS) – which includes Universal Studios Singapore – said the war in Iran and related geopolitical developments have increased energy, freight and logistics costs.

Elevated airfares have led to a drop in travel demand and consumer sentiment.

RWS suffering from worse location

DBS Group Research on Wednesday downgraded the stock to a “hold” rating with a S$0.67 target price, forecasting the remainder of the year to remain “challenging” due to softer tourist inflows.

The target price was identical to that of CGS International (CGSI) Securities Singapore, which maintained “hold” due to a likely “continued loss of market share by RWS”.

Genting Singapore’s poor results contrasted with Marina Bay Sands’ (MBS) performance, which reached another new high for its Q1. Its earnings, reported on Apr 22, rose 30.2 per cent to US$788 million, as net revenue picked up 27.9 per cent year on year to US$1.5 billion.

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Genting Singapore Q1 net profit drops 55% to S$65.2 million on lower gaming revenue

RWS’ positioning on Sentosa island is “relatively less accessible” and presents a locational disadvantage compared with MBS, said DBS analyst Chee Zheng Feng.

“Significant activation efforts are required to drive higher visitation to RWS,” he added, noting that the activations and renovations at RWS have not been able to offset its locational disadvantage.

Similarly, CGSI analyst Tay Wee Kuang noted that Genting Singapore’s non-gaming revenue grew “by only 8.3 per cent, which was insufficient to mitigate the decline in gaming revenue”.

“We believe it could be a ‘winner-take-most’ situation for Singapore integrated resorts, in favour of MBS – its location in the city centre, amid other attractions, positions it as a better captive location for tourists,” he added.

To stem the losses, a “comprehensive rethink” of the RWS operational strategy and asset enhancement initiatives may be required to “restore the company to its historical profitability levels”, said DBS’ Chee.