Saturday, September 11, 2010

Genting HK: a turnaround story

SOMETIMES the headlines don't tell the whole story. A case in point is the recent results of Genting Hong Kong.

The company recently reported a first-half net profit of US$12 million, reversing a loss of US$34.5 million during the same period last year (though Genting HK was a different animal then). But after stripping out US$14.4 million in one-off gains, Genting HK turned in a core net loss of US$3 million for the first six months of this year, a figure which fell far short of analysts' estimates of some US$96 million.

But what the market appears to have missed is the fact that this company made a huge turnaround during its second quarter.

Genting HK, once known as Star Cruises, is a three-pronged US$1.9 billion market-cap gaming entity comprising Star Cruises in Asia, Norwegian Cruise Line (NCL) in the US, and Resorts World Manila (RWM) in the Philippines.

The interesting bits about the company emerged during a briefing provided by management a day after the Aug 28 results.

During the briefing, the company's management said gaming turnover numbers had exceeded all expectations during the second quarter, and hinted that the numbers in July and August continued to take off. Analysts and some of the more privileged investors were told that on some days, wins at its Manila casino could match any other casino in the world, based on return on capital invested.

The best daily win last month exceeded US$7 million, the equivalent of S$10 million. This should be a familiar number to anyone who recently followed the results unveiled by Genting Singapore's Resorts World Sentosa, which reported over S$900 million in revenue for the quarter, or S$300 million a month, which translates to S$10 million in takings per day.

The interesting thing is that RWM achieved this with minimal marketing effort and without the huge capital outlays of the Singapore casinos.

The casino, which is still in its early stages of development, currently operates 199 tables and 1,200 slot machines. This is expected to increase by 50 per cent when it opens its third gaming floor in the final quarter of this year. But RWM has also identified a second site, and has a gaming licence allowing it to operate some 2,000 tables and 7,000 slot machines over the two sites.

In comparison, RWS and Marina Bay Sands each have about 500 tables and 1,300 slot machines.

There is a nice parallel here with Genting Singapore which, after a somewhat undistinguished start marked by a huge writedown of its London gaming assets, took off during its second quarter to post S$396 million in earnings to end-June.

But Genting HK has several advantages over its Singapore cousin and Malaysian parent.

For one thing, the captive Philippines market is young and huge, with its population of almost 100 million. And as the only luxury casino in the country, it faces minimal competition.

Meanwhile, reports emerged yesterday about the Genting group entering into in discussions with the Philippines government on the possible purchase of the latter's state-owned gaming assets. These assets, held under state-controlled PagCor, comprise over 40 small casinos which raked in almost S$900 million in income during 2008. If this latest deal does happen, it could significantly enlarge Genting HK's gaming portfolio and revenues.

Meanwhile, through its Star Cruises, which has been plying the Hong Kong-Taiwan route since May 2009, Genting HK is laying the foundations for its involvement in Taiwan's ambitious integrated resort project. The Taipei government has reportedly already appointed consultants to look into this.

Numbers are important and do tell a story.

But sometimes, looking beyond just historical earnings data, and listening to guidance provided by management, can provide more colour and clarity about the outlook and prospects for a company. In the case of Genting HK, the picture appears a lot more colourful and exciting than its first-half earnings numbers suggested.


David Chan said...

Hi Horse,

Do you think it is right time to go in for Genting HK ? Can it be the next Genting Singapore ? I don't want to miss the boat again.

David Chan said...
This comment has been removed by the author.
horse said...

Hi David Chan,
to be franked, i've stop fishing now. even if i do also on hit and run method.
no doubt market can drive higher but better be safe than sorry. u will be winner if u don't lose money, mkt is always there. this bull seem to last longer than everyone expected and i believe it will last as well, i've been through the cycle, better conserve my $$.
for long term perspective, why don't u consider C ?? think is a better choice for investment.

David Chan said...

Consider C ?? Can you explain on that ? Dun really get you.

horse said...

what i meant is Citigroup. Capitalise on strong riggit. :)

elmo said...


this bull, i meant the real bull has just begun! The ringgit has appreciated,volume has moved up. and signs points to foreign fund starting to come in. We are at the beginning of the grand finale!!

BUT BJToto isn't moving yet. I have said, this counter will be the last to move. If history is right. when BJtoto moves, it's about time we get out. I agree with you. It's not the time to get in, it's about time to exit... get out.

Many moons back, we discussed about Tenaga... I said, TNB will float up to RM10.00 when market picks up. Here we are.. it's inching up to 9.20RM. Just keep an eye on this one. You still have some of TNB stocks in hand?


horse said...


tat time i bought tnb was very much value buy, i hold no more as this is not my preference stock. i still very much focus on div and value stocks.
i believe we both learn from experience, if what u say is true, i will be liquidating bjtoto when it move. :)
no one know when the bull will end, i'm still very much "invested" 80% on shares. will stretch a bit longer before getting my hand off. :)

horse said...

posted drbhcom d other day, may want to adopt hit & run on this. :)

elmo said...


do not trust me with my comment on bjtoto. that's just what i have observed over the past 2 rounds of "pre-crash" bull run. but you or rather we all know, in stock market history is just history, and whethere it will repeat itself is anybody's guess.

this time round i have a feeling that the foreign funds are coming. just to depend on local funds and epf's money to push up the index...of 17+ points a day is a herculean task, almost impossible without the concerted effort of foreign and local fund in tendem. i still have 70% in the market but if the "horse is running.. let it run" but be weary. if the fund is pulling out, i'll dash for the door!

Related Posts with Thumbnails