Genting’s share price tumbled 29.4% on back of $81.6m trade receivables impairment

Core earnings may fall by 30% in Q3.

The drastic fall in Singapore’s gaming volumes is causing warranted distress to Genting Singapore’s shareholders. According to OCBC, Genting has seen its share price taking quite a tumble, falling 29.4% YTD and down 18.0% alone after reporting a large S$81.6m impairment on its trade receivables at its 2Q14 results announcement on 14 August. 

OCBC noted that the drop may be substantiated as Genting remains impacted by near-term negatives. VIP volumes are still suffering as Chinese high-rollers continue to vanish, and Singapore’s gaming pie is steadily shrinking due to the emergence of more casinos in other Southeast Asian countries.

“As seen in rival MBS’ 3Q14 results just out, gaming volume has fallen quite drastically, especially for the VIP segment (down 34% YoY to US$9.1b), following the drop in Chinese tourist visitation. As GS commands a larger share of the VIP market here, it would thus feel a bit more of the impact. Following the previous quarter’s large provision, investors are likely to keep a close watch over GS’ accounts receivables, which stood at S$1.19b as of end Jun 2014,” stated the report.

Here’s more from OCBC:
In any case, we would have a better idea of how much has the drop in Chinese tourists affected its business when it next reports its 3Q14 results in mid-Nov. 

As our forecast already provides for a 30% decline in core earnings for the third quarter, we opt to keep our FY14 estimates for now.

Still, we lower our DCF-based fair value from S$1.33 to S$1.03, mostly to reflect lower growth assumptions in wake of the likely slower economy in China for the next few years.