Genting posted an impressive performance yesterday, gaining 6.2% and was the leader in the 30-member STI. Within the first hour of trading, it generated volume three times the 3-month daily average volume and traded at an intraday high of S$1.575. The counter finally closed at $1.55, the highest since May last year.
 
In comparison to the underlying shares, Macquarie’s Genting call warrants RK1W and Q7TW gained a whopping 21.7% and 46.2% respectively, while the put warrant R8KW fell 25.4% for the day.
 
Genting to follow in LVS footsteps?
The rally came after its competitor Las Vegas Sands (LVS) announced fourth-quarter earnings. Marina Bay Sands (MBS) announced earnings before interest, taxes, depreciation and amortisation of US$303 million for its fourth-quarter, boosted by stronger VIP rolling volume. According to Bloomberg, rolling chip volume rose 53% at MBS and investors are optimistic that the same effect will rub off Genting.
 
Genting is due to report its full year earnings on 21 Feb, after market hours. Based on the average of 21 analyst estimates complied by Bloomberg, the gaming company may post a net income of S$668.7 mil for FY2012. In addition, it is expected to post a net income of S$753.5 mil this year and S$872 mil next year.
 
Looking back at the past month, Genting had gained 11.9% for the month of January, outperforming the STI which only added 3.6% for the same period.
 
Not all that rosy
Despite the company’s strong performance in the stock market, there are some negative news about the company recently.
 
The Department of Statistics said on 15 January that retail sales decreased 0.8% month on month in November, defying economists’ forecast for a 0.5% increase. According to Bloomberg, “Declining Singapore discretionary activity, such as retail sales, presents a challenge for the integrated casino resorts Marina Bay Sands (MBS) and Resort World Sentosa (RWS). General retail sales have contracted year on year for most of the past six months. If consumer spending remains constrained, gambling and related resort revenue may be hampered in 2013.”
 
In addition, MBS and RWS were handed penalties amounting to a total of $230,000 this month with MBS fined $130,000 and RWS being penalised $100,000. Last year, their fines totalled $885,000 and this is the third time the casino operators breached laws. RWS commented that it will “fine-tune their entry systems and processes” and that it took the lapses seriously.

Source: Macquarie Research - 01 Feb 2013