Thursday, May 9, 2019

Genting Singapore Ltd Q1 FY19 Results - Higher Capex & Lower FCF This Quarter

This will be just a quick update on their latest quarterly results since my last article on them which I wrote in March (here) and April (here) recently.

Genting Singapore Ltd reported its Q1 FY2019 results yesterday evening which saw topline revenue and gross profit dropped by 5% and 16% respectively to $640m and $289m.

Net profit as a result dropped year on year by 5% to $205m, which was arguably their weakest quarter.



Whilst the non-gaming business registered its eight consecutive quarter of year on year growth with higher occupancy and higher spend, the gaming business continued to struggle once again as revenue dropped by 8% year on year and 3% quarter on quarter.

The gaming business took up 2/3 of the overall business so it is imperative that this drop will impact the overall earnings for Genting.

Balance sheet continues to remain strong as the company continues to pare down their borrowings from the excess cashflow they generate and ending cash balance has increased to $4.36m. Net Cash balance has increased by about $130m quarter on quarter to $3.42b.




We know the company generates good amount of cashflow up to $1b a year and but free cash flow are coming in a bit lower this quarter at $130m, out of which $100m goes to repaying the borrowings. It seems like they are starting to put some capex for development of the new IR 2.0.

The management gave quite a bit of qualitative outlook on both the expansion of IR 2.0 as well as the competitive RFQ bid preparation for the Japan integrated resort. This is very much in anticipation of the bid proposal.

In terms of valuation, share price has dropped to 94 cents, while free cash flow has also slowed down in preparation for a higher capex, so there is no easy way to evaluate this. If we are valuing this via the earnings multiple, it will not be attractive either as it stands in the high mid teens.

In this regard, I stand by my earlier call that I think it will be attractive at the 84 cents level when TTM FCF is at 10% level. With trade war on the brink, you might just see this coming.

Thanks for reading.

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