Sunday, February 23, 2014

Journey To Retirement Part 1.1 -- Genting SP

The concern of revenue hitting saturation phase in the Resort World Singapore (Journey To Retirement Part 1 -- Genting SP) has finally come.  The following tabulated the earning for FY12, FY13 and FY14.



FY12FY13FY14
RevenueS$3.22bS$2.95bS$2.85b
Net ProfitS$1.02bS$678MS$708M
EPS8.37c4.80c4.81c
DebtS$3.15bS$2.71bS$2.23b
CashS$3.29bS$4.38bS$3.63
NAVS$0.503S$0.543S$0.600
Revenue GamingS$2.69bS$2.37bS$2.19b
Revenue non-GamingS$507MS$558MS$660M


Firstly, the total revenue, revenue from gaming section and total debt have been declining for the past 3 years.  While it was good news to see the debt in the drop but not so in term of revenue.  The bright spot was the revenue from non-gaming section has improved for the past 3 years and that were helping to prevent the net profit from dropping 3 years in a row.  Looking at the proportion of gaming and non-gaming revenue it can being seen the bulk of the total revenue was from gaming section.   That brought the issue of concern of revenue hitting the saturation stage.  This is in general not a good news as the growth of Genting SP could be or already hit the peak.  As such, the first growth stage of the company (Singapore Resort World Sentosa) probably will not be seeing any more upside.  The bonus at the moment is the strong and improving revenue from the non-gaming section (Hotels, Universal Studio Theme Park, etc).  Those are pretty much linked with the increasing number of tourists coming to Singapore for past 3 years but unfortunately, the casino business has no impact from it.

The bad news of revenue hitting saturation stage should have warranted to divest out of my Genting SP investment but like any other businesses the management must be able to take the second step to grow the business.  At the moment, the only solution is to expand the business beyond Singapore and I would classify that as second growth stage.  Should the management is working towards this direction then it is still not time to divest out Genting SP.  In an announcement dated 7th February 2014, Genting Singapore announced proposed investment in an Integrated Resort in Jeju, Korea, and this is no doubt a step taken by the management in moving towards the second growth stage.  From my perspective, the crown jewel of the second growth stage is able to invest an Integrated Resort in Japan.  Though, Japanese Government has stalked in recent times to legalize casino business in Japan but that idea definitely has not gone away for the Japanese.  From global economy perspective, Japan has to take this step in order to further boast their economy.  The traditional of relying on export is no longer working well for Japan.  In fact the global fundamental shift in economy will push Japan to eventually legalize casino.  While it is till too early to have high hope of Genting Singapore landing investment in Japan (even if Japan legalizes casino Genting Singapore might not win the investment bid), the possibility of that happening is the reason for now to continue investing in Genting SP (not divesting it).  Just have to wait for those development to happen.  Of course, good thing never last forever, should Genting Singapore lands the investment in Japan, the second growth stage will come to an end when the revenue hitting saturation phase.  That probably will be the time to really divest my investment in Genting SP.

If there is a second growth stage, there should be a third.  Yes, there should be a third but I do not see that could possible be happening.  The third growth stage if have will be for China to legalize casino and Genting Singapore landing an investment there.  For that to happen I believe the chance is very very very slim.  The sole reason is the social impact on the Chinese population should China legalize casino and that is the main reason why Chinese Government till now is not even considering.

No comments:

Post a Comment