Should I Bet on Genting Singapore Today?

Genting Singapore's Resort World Sentosa is one of the only two big Singapore casinos here. The thing is, would I bet my money on it?

Genting Singapore (SGX:G13) has built an impressive trophy asset for Singapore. 

This one of a kind asset is none other than — Resorts World Sentosa, or RWS.

Now, RWS is one of the only two casinos in Singapore. 

The other being Marina Bay Sands Casino.

Genting Singapore is also owned by the Genting Group — a huge Malaysian empire that dominates the entertainment and hospitality industry. 

You know Genting Highlands? They are owned by the Genting Group.

RWS is an entertainment resort that includes a theme park, hotels and high-class restaurants. 

It serves some of the best Michelin-starred restaurants, and have won multiple awards. This includes “Best Integrated Resort” for eight years straight at the Travel Trade Gazette Travel Awards. 

After the casino law was passed in 2006, Singapore became Asia’s second-largest gaming market and the world’s third-largest. 

King of Singapore’s Megaresort

RWS is a highly popular destination for tourists. 

It drew a huge, global traffic. And has attracted more than 20 million people since it first opened in 2010.

You could say RWS helped Genting Singapore gush its massive free cash flow early on. And even started rewarding shareholders as early as 2012, shortly after RWS was built. 

In fact, Genting Singapore grew its free cash flow from S$118 million in 2011 and at one point in 2017, hit S$1.17 billion.

Its dividends? Genting Singapore grew its dividends from S$0.01 per share in 2012 to S$0.035 per share in 2019.

But since 2018, Genting Singapore’s free cash flow sunk lower and lower. 

And that’s the problem. 

Genting Singapore has a business with a double-edged sword. 

Even though RWS is a huge crowd magnet that puts Singapore under the entertainment spotlight, RWS relies heavily on Chinese gamblers. 

You see, Asians, especially the Chinese love gambling. Other than Macau, the next best destination to play is Singapore. 

(Other than gambling, healthcare is one other big industry to look at with Raffles Medical Group).

Genting Singapore has a huge problem

The fact is, most of Genting Singapore’s customers come from outside Singapore. 

And half of its VIP customers come from China.

In 2012, China launched an anti-corruption campaign. Their goal? To remove all bribery and abuse of power, including a crackdown on gambling. More than 100,000 people have since been charged.

Because of this, no one dared to gamble at all. And the situation got worse in the recent years.

Junkets, people who promoted casinos for commissions, didn’t want to lend money to Chinese “high-rollers” to gamble here anymore. Even junkets were scared.  

Genting Singapore’s sales fell as a result — from S$3.2 billion in 2011 to S$2.5 billion in 2019. 

All because of a lack of Chinese gamblers. 

This makes Genting Singapore a volatile business. 

As a result of the clampdown, many Chinese gamblers avoided paying their debt, resulting in RWS taking a loss. 

That’s why in the recent few years, Genting Singapore reported a huge write-offs on their invoice bills.

Now, last year, the Covid-19 pandemic was a huge nail in the coffin for Resort World Sentosa

The entire place’s shut down. Flights got cancelled in and out of China to Singapore. In its latest financial results for the year ending 2020, sales fell 57% to S$1.06 billion, while its net earnings dropped a massive 90%. 

Singapore casinos couldn’t operate. 

Today, if RWS tries to attract local audiences to the casino, it just isn’t the same as the Chinese “high rollers”. 

As a result, since 2011, Genting Singapore’s shares have slid down 58% to S$0.93 per share.

 And the pandemic last year dragged the shares lower, making shares even cheaper. 

Would I buy Genting Singapore today?

Of course, there are bright spots for Genting Singapore. 

The company still has a huge cash pile of S$4 billion, which they have kept for bidding another casino project in Japan.

The thing is, the bid for a new casino in Japan has been delayed for years.

And with the pandemic lurking around, this isn’t happening anytime soon. 

While Japan’s Integrated Resorts Implementation Bill was approved in 2018, there’s still a lot of work to be done for the country’s first casino to start in 2024. 

And Genting Singapore might not even be in the cards for casino projects. 

For me, Genting Singapore, though owned one of the best monopolies in Singapore, holds a huge risk for me to take on at this point. Even with the shares going cheaper, I don’t see a reversal of the shares anytime soon. 

For me, I’ve other better stocks to buy. And I’m staying away from this company for now. 

Sometimes, investing can be simple.

Always here for you, 
Willie Keng, CFA
Founder, Dividend Titan

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