Genting Singapore’s third-quarter earnings ‘fell short of expectations’ due to lower VIP gaming volumes and higher bad debts linked to Chinese players, Maybank research pointed out.
In the third quarter of 2024, Genting recorded a core net profit of SG$91 million (68.5 million), marking a 58 percent decline year-on-year and an 18 percent drop quarter-on-quarter.
This brought the total core net profit for the first nine months of the year to SG$450 million ($338.9 million), an 11 percent decrease compared to the previous year, representing 63 percent of the company’s full-year estimate.
The shortfall in earnings was primarily attributed by Maybank researchers to a VIP gaming volume of SG$26 billion (19.5 billion), which, despite an 8 percent year-on-year increase, only reached 66 percent of the company’s annual target.
Additionally, higher-than-expected bad debts were said to have contributed to the -‘disappointing results’, as Chinese accounts for the majority of VIP gambling debts are not enforceable in China.
The VIP and mass market segments both showed signs of weakness, with Genting cautioning that VIP volumes could continue to decline amid economic uncertainties in China.
In the third quarter VIP volume decreased by 2 percent quarter-on-quarter to SG$7.7 billion ($5.8 billion), but with Maybank analysts noting that the VIP segment typically yields lower EBITDA margins of around 20 percent.
Conversely, the mass market gross gaming revenue, which has a higher EBITDA margin of approximately 60 percent, fell by 6 percent quarter-on-quarter, despite an increase in visitor arrivals.
‘This decline was partly due to the closure of the Hard Rock Hotel, which will reopen in the first quarter of 2025′, Maybank argued.
In light of these developments, Maybank analysts have revised their core net profit estimates downward by 16-17 percent for FY24, FY25, and FY26.
They anticipate a stabilization in Q4 2024, with normalized EBITDA expected to remain flat quarter-on-quarter at around SG$225 million ($169.5 million), as seasonal lower visitor numbers may be offset by reduced bad debts due to stricter credit policies.
