Genting Singapore too much cash: Bernstein

Bernstein has downgraded Genting Singapore from Outperform to Market Perform as a result of a significant amount of cash held in the company’s balance sheet, according to a note on Monday.

The casino operator reportedly has S$5.2 billion (US$3.9 billion) cash in the balance sheet, which was previously in part to prepare for a casino development opportunity in Japan.

However “…at this stage, we see the likelihood of gaming legalization in Japan in the foreseeable future to be of slim probability.”

The brokerage said it was also concerned of the company’s potential investment in Genting Berhad’s Resorts World Las Vegas development, which they see as a low ROI project.

Genting also has no announced plan to expand return of capital to shareholders, says the brokerage.

“Aside from capital allocation, the unwinding of non-performing gaming credit has taken longer than expected, and this issue may not be fully resolved until the end of 2016, putting pressure on profitability and cash flows. Meanwhile, tightening credit to high rollers further suppresses VIP revenue, and Genting faces strong competition from Marina Bay Sands in the Mass segment,” said Bernstein.

The brokerage said it has lowered the Genting Singapore’s Target Price to S$0.80 from S$0.90.