SGX-listed firm has S$3.4 billion in net cash whereas HK-listed entity' s net debt-to-equity ratio is 79.56 times

 

CRUISE ship operator Genting Hong Kong (GENHK) is struggling to repay its creditors, but analysts say the same is unlikely to be the case for Genting Singapore given the latter' s financial strength.

 

Last month, GENHK said it had suspended all payments to creditors in a bid to maintain its critical services. As the company' s stock slid, its largest shareholder Lim Kok Thay reportedly had to pledge even more of his stake as collateral for loans.

 

Investors have shown some concern about the rest of the businesses within the Genting empire. In the last two weeks, shares of GENHK have declined 36.46 per cent while those of Genting Bhd in Malaysia are down 12.15 per cent. As for Genting Malaysia, its shares have fallen 6.64 per cent.

 

Some of the concerns may be warranted. According to Bloomberg data, as at end-June this year, GENHK' s net debt-to-equity ratio stood at 79.56 times. Its quick ratio, a measurement of liquidity, stood at 0.47.

 

That makes GENHK the most indebted of the listed Genting entities. But it is not the only company within the group that is in poor shape (see table). Genting Malaysia, which runs resorts and casinos in Malaysia, the UK, the US and the Bahamas, had a net gearing ratio of nearly 20 times as at end-December.

 

Genting Singapore, on the other hand, appears to be in a much better position.

 

" We do not think Genting Singapore faces the same liquidity risk as Genting Hong Kong," said Jennifer Song, an analyst with Morningstar.

 

" From its recent financial information, we think the company' s financial health is still sound... Despite near-term outlook remaining lacklustre, we think, with gradual opening up of the border and social distancing measures, the profitability of Genting Singapore will improve, and we expect a full recovery to 2023," she added.

 

In its financial results statement released last month, Genting Singapore logged a net loss of S$116.68 million for its first half ended June 30. But it also had S$3.4 billion in net cash.

 

In a research note published on Aug 18, brokerage firm Union Gaming said that it has " no concerns over the company' s financial health" .

 

" With a significant net cash position, a newly rationalised cost structure and very little debt, we see limited downside. The company prudently suspended its dividend, which is not surprising, but should further improve the liquidity outlook - which we view as a positive," it added.

 

Genting Singapore may have to use quite a bit of its cash for the expansion of its integrated resort. Last year, it committed to investing S$4.5 billion to expand Resorts World Sentosa. If Genting Singapore does not fulfil this commitment, it may face higher taxes.

 

Ms Song from Morningstar said it is unlikely for the company to " pull out (from the) investment or expansion, as both the Singapore government and Genting Singapore are looking for long-term development" .

 

She added: " The RWS expansion is important to Genting Singapore to maintain its competitiveness against other regional players, such as Macau and the Philippines, as well as Japan in the mid to long term."

 

Genting Singapore shares on Tuesday eased one cent to S$0.69.

 

Separately, GENHK said on Tuesday night that it has sold the Zouk Group, which operates the popular nightclub, for S$14 million to a firm owned by Lim Keong Hui, the son of Kok Thay.

 

The sale is part of GENHK' s effort to offload non-core assets and shore up liquidity amid Covid-19, it said.