Genting S'pore net profit down but long-term prospects good

Saturday November 13, 2010

Genting S'pore net profit down but long-term prospects good
By FINTAN NG
fintan@thestar.com.my


PETALING JAYA: Genting Singapore Plc's prospects, like the city-state's gaming industry in general, are still good in the medium to long term, despite the over 52% plunge in the company's net profit to S$187.8mil for the third quarter ended Sept 30 compared with the preceding quarter.

The company's share price dived following the release of the quarterly results on Wednesday with the shares closing down 15 cents to S$2.13 yesterday.

Genting Singapore, a subsidiary of Genting Bhd, operates Resorts World Sentosa, one of two integrated resorts in the city-state, the other being the Marina Bay Sands operated by Sheldon Adelson's Las Vegas Sands Corp.

The company's share price, which has been steadily rising since the beginning of the year, was at its highest ever on Nov 9, when it closed at S$2.35.

The share price and valuation, according to a market sceptic, did not seem to reflect the short-term challenges ahead.

The company has an enterprise value/earnings before interest, taxes, depreciation and amortisation (EV/Ebitda) of 19.42 times and a price-to-earnings ratio of over 32 times.

The short-term challenges, according to analysts, essentially revolved around when junket operations could commence legally and when the industry could reach a level of maturity when growth, like Macau, would be exponential.

These challenges, however, would mean that parent company Genting would miss out on better contributions from the Singaporean operations although several analysts felt that there could be earnings surprises down the road.

"The company's Resorts World Sentosa is only in the first year of operations, so there is definitely more room for growth," an analyst with a local investment bank told StarBizWeek.

She said although the share price might have run a little ahead of valuation, long term the prospects were still good.

HwangDBS Vickers Research Sdn Bhd analyst Yee Mei Hui said even if EV/Ebitda was on the high side, there was a premium based on the fact that the Singaporean market was a duopoly.

"It is also quite clear regulations-wise over the next 10 years, so there's lower risk and the market has yet to see its full potential as in Macao," she added.

Besides which, Yee said, junkets could start as early as the beginning of 2011.

http://biz.thestar.com.my/news/story.asp?file=/2010/11/13/business/7418599&sec=business