Investors dumped Genting Singapore’s shares yesterday, a day after the listed casino operator posted its worst-ever quarterly performance and did not declare an interim dividend for the first half, despite sitting on a huge net cash pile of about $3.3 billion.
That, according to several analysts, was below their expectations, even as the board said it “recognises shareholders’ interests” and “has intentions to declare a final dividend for full-year 2020, if necessary, out of its retained profit”. The company had issued an interim dividend of 1.5 cents a share a year ago.
Genting Singapore fell as much as 5 per cent to 67.5 cents before closing down 4.23 per cent or three cents at 68 cents. This came after it logged a $163.3 million net loss for the second quarter, reversing a $168.4 million net profit from a year ago.
Making zero revenue amid a shutdown of nearly three months in the second quarter as the coronavirus pandemic disrupted global travel and tourism, was “devastating”.
As a result, it suffered a “deficit in cash flow from operating activities of $80.2 million”, it said.
DBS Equity Research analyst Jason Sum said Genting Singapore’s second-quarter losses “did not come as a surprise”, but he was caught off guard by the suspension of its interim dividend.
But despite the “brutal hit to its earnings, we believe downside from here on is limited due to its attractive valuation”, he added.
The company has reduced operating costs by 20 per cent with a cut in full-time staff, and slashed salaries of existing staff by 20 per cent, Morgan Stanley Asia equity analyst Praveen Choudhary said.
But without the successful development of a coronavirus vaccine, and further loosening of cross-border travel curbs and social distancing measures, local and Malaysian gamblers will not be enough to help the casino operator break even. Without international travellers, its non-gaming attractions will also not be able to break even, he added.
Genting Singapore’s revenue for the three months to June 30 plunged 94 per cent to $41.3 million from $636.8 million a year ago, as fallout from the pandemic devastated both its gaming and non-gaming revenues.
Owing to the circuit breaker measures, Resorts World Sentosa suspended all its offerings, including Universal Studios Singapore, SEA Aquarium, Adventure Cove Waterpark and Dolphin Island, hotels and the casino from April 6 to June 30. The suspension sent gaming revenues plunging 99 per cent to just $6.5 million in the second quarter from $441.1 million a year ago, while non-gaming revenues plummeted 92 per cent to $16.3 million, from $195 million a year ago.
The group’s Ebitda – a measure of profit before interest, tax and other items – swung into the red with net losses of $84.9 million in the second quarter from a net profit of $294.4 million a year ago. Earnings per share for the half year ended June 30 came to 0.97 cent, down from 3.1 cents a year earlier, while net asset value was 63.4 cents, against 66.8 cents as at Dec 31.
Further, the company’s $4.5 billion mega expansion project “RWS 2.0” will be delayed because of pandemic-induced disruption to global supply chains and the local construction industry. Also, it has to make design changes to incorporate health and safety requirements in a post-Covid-19 environment, the company added.
CGS-CIMB analyst Cezzane See has forecast a “tough year for longer-term investors”, saying the casino operator’s near-term prospects are uncertain.
But the brokerage reiterated its “add” call as it believes the company’s strong balance sheet (net cash balance of $3.3 billion as at June 30) will tide it over, and its stock will likely recover with the gradual reopening of Singapore.