Genting ... Aug10

Genting Singapore plc’s (GS) UK operation, which it is divesting to Genting Malaysia Bhd (GM), saw an improved business volume in the second quarter ended June 30, 2010.

Its UK casino operations’ revenue for 2Q10 dropped 3% to S$104.9 million (RM244.6 million) from S$108.0 million in the previous corresponding quarter, mainly due to currency translation of the weak pound against the Singapore dollar.

However, the underlying revenue of UK casino operations in pound improved by 6%, due to a higher business volume. Earnings before interest, tax, depreciation and amortisation (Ebitda) in the UK fell 25% to S$9.1 million as a result of bad debt written off.

As for the group, GS posted a net profit of S$396.5 million, compared to a loss of S$50.7 million in 2Q09 mainly due to contribution from its newly opened Resorts World Sentosa that started operations in February 2010.

Revenue came in at S$979.3 million and Ebitda at S$513.9 million. Earnings per share (EPS) stood at 3.27 cents.

For the six months to June 30, GS reported a net profit of S$248,000 versus a loss of S$82.5 million. Revenue rose to S$1.43 billion from S$225.5 million.

The Universal Studio Singapore theme park, which is part of Resorts World, increased its daily maximum capacity to about 8,000 with an average visitor spend of S$84, said GS in a filing to the Singapore Exchange.

Occupancy at Resorts World’s hotels was 70% for the period with an average room rate of S$263 a night.

Genting Bhd is the common shareholder of GM and GS, holding equity stake of 49.06% and 51.73% respectively.

Going Forward …

Given that Genting SP’s outstanding performance in the last few months, it may turn the corner in 2010 after three years of losses. It is certainly turning out to be a money spinner for Genting Group.

Critics however said that the second quarter for Genting SP was much of better than the first quarter. This may subsequently cool off. But seems that Genting SP’s momentum is still strong for now.

The tax structure is different for Malaysia and Singapore. In Singapore, the gaming tax is 15% and 22% for the VIP and the mass markets respectively.

Getning SP may face some challenges of its own, including losing market share to it competitor Marina Bay Sands as the latter ramps up. This may consequently cause margins to slip as it pursues aggressively revenue growth. RWS saw some slowing in business in the first two weeks after opening of MBS, Genting Singapore was able to stem the decline with a slew of new offerings.

Doubts remain whether Genting SP’s solid performance is sustainable once the initial euphoria wears off.