Genting’s 2Q profit rises on gaming business

by MARK RAO/ pic by BLOOMBERG

GENTING Bhd remains cautious on the regional gaming market, despite turning in a stronger performance for its second quarter (2Q) ended June 30 this year.

The group’s net profit jumped 56.4% year-on-year (YoY) to RM599.68 million on higher contributions from its resorts in Singapore and Malaysia, as revenue grew 13.1% YoY to RM5.45 billion for the period.

Resorts World Sentosa (RWS) in Singapore benefitted from the gaming business as it noted a higher win percentage in the VIP rolling segment, while the underlying mass gaming business declined.

Genting said the seemingly strong growth in gaming revenue was largely driven by the favourable win percentage, but noted the underlying revenue drivers were impacted by factors that will continue to weigh on RWS’ business for 2019.

“RWS maintains its cautious stance on the premium segment as the regional economic environment faces uncertainty and will impact consumer confidence,” Genting stated in its exchange filing yesterday.

“RWS will continue to innovate its offerings to enhance and diversify its appeal to various target markets around the region.”

The group highlighted that RWS’ planned SG$4.5 billion (RM13.67 billion) expansion is aimed at elevating the resort’s position as the premier integrated resort destination for the region.

Its Malaysian operations noted stronger revenue on improved hold percentage in the mid to premium players segments.

This was in spite of its flagship resort in Genting Highlands, namely Resorts World Genting (RWG), registering an overall decline in business volume due to the lower incentives offered to customers as part of cost rationalisation efforts.

The segment also recognised a reversal of provision from a contract termination amounting to RM60.2 million related to its outdoor theme park at RWG.

Its majority-owned subsidiary Genting Malaysia Bhd (GenM) has resolved its dispute with 21st Century Fox Inc and The Walt Disney Co, where it had initially sought over RM1 billion from the two companies for pulling out of their contract.

Plantation revenue came in higher in the 2Q as the downstream manufacturing segment benefitted from higher demand for its refinery and biodiesel products, although the division was weighed down by lower palm product prices.

Genting’s power division brought in stronger contributions due to higher generation from its Indonesian Banten coal-fired power plant, while the oil and gas business came in weaker due to lower average oil prices.

For the first half of the year, Genting’s net profit rose 17.6% YoY to RM1.16 billion, while revenue improved 9.4% YoY to RM11.02 billion.

The group declared a 6.5 sen dividend for the 2Q this year.

Earlier this week, Fitch Ratings Inc downgraded Genting’s outlook to ‘Negative’ from ‘Stable’ on the risk that the company may fail to deleverage to a level consistent with its current rating.

This comes as GenM is acquiring an up to 49% stake in loss-making Empire Resorts Inc at a time when Genting is committed to other largescale capital expenditure over the next two to three years.

GenM agreed to purchase a 46% stake in Empire from Kien Huat Realty III Ltd for US$128.6 million (RM538.8 million) earlier this month. Kien Huat Realty is the investment vehicle of Tan Sri Lim Kok Thay, chairman and CEO for both Genting and GenM.

Through its wholly owned unit Genting (USA) Ltd (GenUSA), GenM formed a joint-venture (JV) company with Kien Huat Realty, Hercules Topco LLC, whereby both parties agreed to place all their common stock held in Empire into the JV.

GenUSA and Kien Huat Realty will hold a 49% and 51% membership interest respectively in the JV, which is to undertake the planned delisting of Empire from the US stock market.

Currently listed on the Nasdaq, Empire owns and operates Resorts World Catskills and Monticello Casino and Raceway in New York.