Recently, the haze has affected Singapore. We believe that Genting Singapore PLC’s (GenS) theme park, Universal Studios Singapore would be hit by the haze as the number of visitors is expected to decline.
The theme park recorded about four million visitors in FY12. Average spending was roughly S$86/day.
However as mentioned before, non-gaming activities do not contribute significantly to GenS’ profits. Instead, casino activities account for a larger portion of GenS’ bottomline.
Non-gaming activities accounted for 19% of GenS’ revenue in FY12. Non-gaming activities consist of revenue from the hotel, theme park and food and beverage.
Instead of the haze, we believe that a more pressing concern is the economic slowdown and credit crunch in China. This would affect VIP business in the casinos in Singapore.
Although statistics have never been disclosed, we reckon that mainland Chinese are one of the largest VIP players in Singapore.
The VIP segment accounted for 49% of GenS’ net wins and 53% of gross wins in 1QFY13. Against a backdrop of uncertainty in China, it would be difficult for GenS to extend credit to the VIP players from the country due to the high risk of the debt being uncollectible.
Impairment loss on GenS’ trade receivables was S$45.2mil in 1QFY13 compared with S$36.2mil in 1QFY12.
Maintain a Sell on GenS. Our fair value of S$1.50/share is under review.
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