SINGAPORE - Investors sold off the stock of Genting Singapore on Friday (Aug 7), 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 "recognizes 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 shares were down 4.93 per cent or 3.5 cents to 67.5 cents at 4.30pm on Friday. They closed at 68 cents, down three cents or 4.2 per cent.
The company had 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 Covid-19 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 the company's second-quarter losses "did not come as a surprise, but he was caught off guard by the suspension of its interim dividend."
He, however, added that despite the "brutal hit to its earnings, we believe downside from here on is limited due to its attractive valuation."
The company has reduced operating costs by 20 per cent following a cut in full-time staff and slashing 20 per cent off the salaries of existing employees, Morgan Stanley Asia equity analyst Praveen Choudhary said.
But without the successful development of a vaccine, and further loosening of cross-border travel restrictions 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, Resorts World Sentosa suspended all offerings, including Universal Studios Singapore, SEA Aquarium, Adventure Cove Waterpark and Dolphin Island, hotels and the casino from April 6 to June 30.
The move 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 plummetted 92 per cent to $16.3 million from $195 million a year ago.
The group's Ebitda - a measure of profit before tax, interest 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 quarter was 0.97 cent, down from 3.1 cents a year earlier, while net asset value was 63.4 cents, compared to 66.8 cents as at Dec 31, 2019.
Further, its $4.5 billion mega expansion project "RWS 2.0" will be delayed owing to the pandemic-induced disruption to global supply chains and the local construction industry. Also, it has to accommodate design changes to incorporate health and safety requirements in a post-Covid 19 environment, the company said.
CGS-CIMB analyst Cezzane See forecasts a "tough year for longer-term investors," as 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.
