Genting Singapore's shares jumped 5.1 per cent yesterday after the company posted fourth-quarter earnings that were better than expected.
Lower bad debt provisions for high rollers and other cost-saving steps led to a sharp turnaround in the firm's fourth-quarter as well as full-year earnings.
In the wake of better-than-forecast results, the Resorts World Sentosa operator has attracted more generous comments from analysts.
Genting shares jumped as high as $1.04 at the opening yesterday - a level not seen since April 2015 - after it posted its results after market close on Wednesday. Among the most actively traded counters, it closed at $1.03, up five cents or 5.1 per cent, with nearly 79 million shares changing hands.
Genting Singapore posted a fourth-quarter net profit of $159.2 million, reversing a loss of $7.8 million a year earlier, while revenue edged up 2 per cent to $557.7 million from $547.4 million a year ago.
Bad debt provisions shrank 14 per cent to $38.9 million as it continued to tighten its credit policy for the VIP gaming business and "remodel" its commission structure.
OCBC Investment Research upgraded its call to "buy". Noted OCBC analyst Eli Lee: "We are encouraged by the reduction in impairment of receivables relating to VIP gaming since the group calibrated its credit policies and commission structure.
"Investors should also note that... disposal of its 50 per cent equity interest in an associate, Landing Jeju Development, last month will likely be reflected as a gain on disposal of $96.3 million in the upcoming first quarter 2017 results."
But improving its book quality by reducing bad debt provisions comes at a price. RHB, which has a neutral call on the gaming counter, warned that this will "likely impede its VIP growth".
Meanwhile, Genting Singapore's dividend policy won approval from some analysts. Union Gaming analyst Grant Govertsen maintained a hold call, saying his firm is "pleased that management is returning more capital to shareholders, with an indication that the three cents seen in 2016 will be the policy going forward. This translates to a 3 per cent yield."
Genting Singapore has signalled its intention to go all out in Japan once the authorities there firm up the integrated resort development plan. This follows the country's move in December to legalise casinos. Proponents are hoping to pass further legislation this year that will enable the first casino to open there in the early 2020s.
Said RHB: "We are not entirely surprised, given that the Japanese gaming market is widely seen as the next holy grail among global casino operators. Genting Singapore estimates that setting up an integrated resort in Japan could cost US$7 billion to US$12 billion (S$10 billion to S$17 billion)."