Genting continues to stay strong despite a general decline on the Asian gambling market.
Singapore gaming sector is in distress, and recent figures from Genting Group, operating under Singaporean gambling laws, confirm this. Gaming industry has always been quite resilient even in times of global recession, offering quite attractive investment options, but unfortunately it seems that those times are over.
Genting Group figures and prospects
Genting shows resilience to declining gambling market according to analysts
• The company is planning to expand its offerings under Singaporean gambling laws
• The group is also bidding for a casino resort in upstate New York
• Despite falling figures, Genting is expected to grow next year
Recent financial results are in from Genting Group, and they reveal a slowdown in both land-based business and online casinos in Singapore. The main reason for decreasing revenues is the fact that Chinese VIP players are now gambling far less in Singapore. A trend seen everywhere in the region including Macau.
A gaming sector analyst has revealed the current situation to Singaporean gambling news: “It is a cyclical weakness rather than a structural one. Genting has been expanding its market share in the VIP segment. Genting’s story may not be exciting in the near term. Fundamentally, the group remains strong and its earnings are resilient, but it is going through some challenges.”
According to the analyst, Genting’s Malaysia holding is still going strong in the middle of expansion outlined in the Genting Integrated Tourism Plan. One integral part of this plan is further expansion of Malaysian properties with additional hotel rooms and a brand new theme park.
This can only suggest that Genting is still to see its brightest days. According to industry analysts the group is expected to reach higher earnings next year, when the new facilities are expected to be completed.
There are high expectations that South Korea and Japan would allow casinos in the future, and Genting will of course be entering those markets with their offerings. However, that part of the expansion may be delayed indefinitely, due to regulatory problems in those countries.
Genting Singapore betting on Asian markets is now the only strategy for the company. Their American business in New York is going strong, and could even receive further boost, should the company win the big for a resort in upstate New York.
RW Orange County LLC., wholly-owned by Genting Malaysia has already submitted a proposal, hoping to get their hands on one of four casino licenses to be given out for upstate New York.
General situation on Asian gambling market
While Genting situation is quite good despite the obvious slowdown, the current situation on the market as a whole is far from perfect. Macau’s revenues revealed a record drop in October, 2014. Macau Gaming Inspection and Co-ordination Bureau revealed that the market fell over 23 percent in the world’s now biggest gambling Mecca. The decline in October is the fifth consecutive fall, and Macau can be in for their longest losing streak ever.
However, despite the revenue fall, industry analysts say that Genting’s earnings for Macau remain strong. Here’s what one of them shared: “The strengthening of the Singapore dollar against regional currencies could slow down visits from the South-East Asia region, while the economic slowdown in China could also adversely impact trips from China, which constitute the bulk of its VIP segment.”
The renowned analyst firm, JP Morgan, has released a market report recently, outlining rather dull expectations for Singapore market expansion. They attribute it to relatively high penetration and regional competition standing in the way of growth.
JP Morgan report contains the following among other results: “GenS’ competitor Marina Bay Sands (MBS) is shifting to profitability by grabbing more stable/high-margin, mass-market share from GenS, which has a disadvantageous location. GenS’ business mix is becoming more unfavorable, with more volatile or low-margin VIP and less mass contribution.”
At the same time, Fitch Ratings expect Singapore casino credit profiles to remain resilient, despite the decline in foreign visitors, which will undoubtedly weaken gaming growth in the country.
Fitch report contains: “Both GenS and MBS are mature gaming properties that will be able to withstand narrower earnings before interest, tax, depreciation and amortization margins for the next 12 to 18 months without impairing their underlying credit profiles. Longer term, however, the Singapore casinos will face increasing regional competition from new casinos in the Philippines, Macau and, potentially, Japan.”
According to the renowned rating agency, the decline in revenues from the VIP segment is only temporary, the market is expected to shift back as early as 2015.
The rating agency findings continue to state: “The lower Chinese inbound visitors also reflects the implementation of new rules in October 2013 that address practices such as coercive shopping trips, and low-price quality tours. They have also been affected by the disappearance of Malaysia Airlines flight MH370, the abduction of Chinese visitors in Sabah and political unrest in Thailand.”
Another analyst company, CIMB Research, opined that New York casino license and the capacity expansion in Asia, will certainly be catalysts for Genting ratings. While the US mid-term elections are now over, the announcement of the casino license bids is imminent in the US.
Their report reads: “Despite the stiff competition in Orange County, Catskills region (six bidders), we are confident of Genting winning one of the bids. Genting has offered the highest licensing fee for Sterling Forest casino and 50%-100% higher salaries for both its casino bids. It has strong lobbyists and has made significant campaign contributions.”
According to these analysts, Genting is paying the highest fee for Sterling Forest – $450 million in one-time payment and further annual commitments to state education. Genting is also providing twice the national average annual salary at its casino at Sterling Forest – $75,000 compared to $39,000, and over 50 percent more than at RW Hudson Valley ($60,000).