Last year didn’t exactly end well for Genting Singapore, a known destination for high rollers, famous not only for its casino but for the resorts with the same name that it operates. Especially if you were to compare the $7,8 in the red from December 2015, to the $89.2 net profit they ended with in the year before. To call it quite a drop doesn’t quite cover it.
The overall revenue decline for the company was 14% year-on-year, totalling at $547.4 million, for gaming alone the plunge was a whooping 19%, the equivalent of $374 million. The adjusted earnings before interest, taxes, depreciation, and amortisation (a key indicator for operating performance used in the industry) was down 5% or in cash – $181.3 million.
An official statement shed some light on the reasons for the steady decline: “Gaming revenue was impacted by a lower VIP gaming market as we continue to tighten our credit policies.”. The company had also reported a net loss of $16.9 million in the second quarter ended June last year. For the entire financial year of 2015, Genting Singapore’s net profit dropped 85% to $75.2 million.
Over the past 20 years the Singapore based PLC has been a favourite destination for gamblers across continents, covering venues in America, Malaysia, Australia, the Philipines and since the acquisition of Stanley Leasure back in 2005 – the United Kingdom as well.
The operator announced they are working on lowering operating costs and improving efficiency to recoup some of the losses. Despite lower number of tourists across the country though, the Genting Group reported over 7 million visitors to their hotels, outperforming all competition. So it seems like it’s just the gambling side of the business that is suffering. Let’s have a look on why that is.
The explanation for the drastic drop seems to be the lack of interest on the VIP gaming market. Singapore is one of many destinations suffering from China’s major crackdown on corruption, that is reaching even high level officials. Xi Jinping’s campaign against fraud has proved to be a disaster for Macau already, the only place in China where gambling is legal. High profile Asian gamblers are fleeing or keeping low profile, with other countries benefiting from their presence. South Korea, Vietnam and a number of countries in Europe where gambling is regulated and legalised have been reported to be the new top destination for the orphaned Chinese top end players. According to Reuters, one of Macau’s top casino junket operators, a Vietnamese investment group and Hong Kong jewellery chain Chow Tai Fook will be teaming up in the development of a $4 billion casino resort in Vietnam. The lower tax rates in Australia seem to be also tempting. Let’s wait and see how will this unfold. Meanwhile, stay tuned for more financial news from our team.