Ballooning bad debts hound struggling Genting

Debt charges swelled to $92.5m in Q3.

Genting is only now beginning to regret its choice to lend money to VIP clients over a year ago. The struggling resort and hotel operator saw its bad debt provisions jump to $92.5m in the third quarter, compared to just $56.6m in the second quarter.

Analysts at RHB Research warn that Genting’s debt provisions will continue to be high until the second half of 2016, as Genting only began tightening lending requirements in the second quarter of 2015. Provisions for doubtful debts are provided for credit extended 12-18 months ago.

“While we are negatively surprised by the unexpected jump in its 3Q15 bad debt provisions, management expects to see improvements in the quality of its books come 2016, owing to the group’s stringent credit control as well as the tightening of its collection procedures over the past 9-12 months,” said RHB.

Apart from bad debts, doubts are also aplenty about the state of Genting’s investments.

“In addressing concerns over the volatile nature of its holdings of derivatives and financial instruments, management indicated that most of its previously-outstanding positions have expired or been settled,” said RHB.

“While we acknowledge that the operating environment remains challenging, we continue to believe the worst is likely over for Genting Singapore,” said RHB.