Genting Malaysia: Earnings down on forex losses

Casino operator Genting Malaysia recorded a year-on- year earnings decline of 60 per cent in the first quarter of 2016.

[dropcap]L[/dropcap]eisure and hospitality giant Genting Malaysia saw earnings in the first quarter of 2016 drop by 60 per cent, as foreign exchange losses cut into the group’s bottom line.

In the three months ended March 31, revenues for Genting Malaysia, which owns the Resorts World brand and operates leisure properties around the world, topped MYR2.2bn (E), compared to MYR2.1bn in the prior-year period. Earnings for the company, however, tumbled to MYR144.1m (E), down 60 per cent on the MYR358.3m (E) reported in the first quarter of 2015.

The group attributed the profit drop primarily to foreign exchange losses of MYR140.4m (E) in the period. “Whilst the operational performance of the group grew this quarter, the strengthening of the Malaysian ringgit against the US dollar resulted in significant foreign exchange losses on the group’s USdollar denominated assets,” Genting Malaysia said in a filing to the Bursa Malaysia stock exchange. “This, along with higher depreciation and amortisation charges, led to the drop in the group’s net profit.”

Resorts World Las VegasGenting Malaysia runs Resorts World Genting, Malaysia’s only casino resort, and operates casinos in the US, the Bahamas and the UK. The company is currently developing Resorts World Las Vegas, and confirmed in an April filing that it would also be managing the casino at a resort being developed by a Native American tribe in Massachusetts US.

On a market-specific basis, the group achieved a higher volume of business in Malaysia during the first three months of 2016 compared to the same quarter last year. But the firm reported lower revenue in its home market – MYR1.31bn (E), down by 6.3 per cent year-on-year – due to a lower hold percentage in the premium player business and the impact of a new Goods and Services Tax (GST).

Since April 1, 2015, consumption of goods and services in Malaysia has been subject to a GST at six per cent. According to some investment analysts, GST on goods and services at Resorts World Genting is levied at an effective rate of 4.25 per cent, rather than the national rate of six per cent, because Genting Malaysia is allowed to offset some of the GST liability against its gaming tax liability.

In lieu of the foreign exchange losses, Genting Malaysia said its overseas ventures are performing well, with the group attributing its revenue increases to the “premium player” sector in the UK. In the Americas, a drop in revenue at Resorts World Bimini in the Bahamas was offset by higher volumes at Resorts World New York City.

Looking ahead, Genting Malaysia said the regional gaming market is expected to face “continuing uncertainties” Resort World Logosurrounding the Asian premium player business. “The global economic environment is expected to be challenging in 2016,” the company stated. “Growth continues to slow in the emerging markets, while recovery in the advanced economies remains modest. In Malaysia, the growth is expected to grow at a slower pace, underpinned by domestic demand.”

The firm said it would continue implementing its Genting Integrated Tourism Plan, which aims to upgrade the Resorts World Genting complex. The company said new attractions and facilities included in the plan would begin opening “from the second half of 2016”. One of the main features of the initiative is the addition of a 20th Century Fox theme park, although Japanese brokerage Nomura said in a March note that the completion of the park “will not happen before end-2017”.

In the UK, Genting Malaysia said “plans are currently underway for both the group’s land-based casinos and [a] recently acquired online gaming operation to be streamlined as an integrated online, mobile and retail gaming business under the focus of a single management to provide a seamless multi-channel experience for its customers”.

Genting Malaysia’s firstquarter results were released as its subsidiary, Genting Hong Kong, announced it was building 10 cruise ships worth $4bn (E3.5bn) in anticipation of higher demand from the Chinese market.

The company, which already operates seven ships under its flagship brand, Star Cruises, said it plans to expand into the “underserved” Asia-Pacific cruise market.

“We are focused on delivering a world-class vacation experience for Chinese cruise passengers,” said Genting Hong Kong chairman Lim Kok Thay.

Two mega cruise ships, over 200,000 gross tonnes each, will be built by Lloyd Werft Group for Star Cruises, which is focused on the contemporary cruise market. The rest, at a size of 50,000 gross tonnes each, will be operated by the company’s Crystal Cruises brand and catered towards the international luxury market.