Genting Singapore has a rather unique balance sheet for a casino operator. Typically, the casino industry is known for its hefty capital expenditures, as it requires substantial investments in building hotels and casinos on prime real estate. Globally, most casino companies strategically use debt to optimize returns for their shareholders.
Genting Singapore’s parent company, Genting Berhad, follows this approach by leveraging its operations in Malaysia, particularly for their ventures in Genting Highlands. Similarly, Marina Bay Sands has opted to finance its recent expansion through borrowing, taking advantage of low interest rates.
However, the management of Genting Singapore seems to be making poor decisions that could be detrimental to shareholders. The company is sitting on a significant amount of cash, amounting to SGD$3.6 billion, which earns a modest interest income at a yield of 3%. In contrast, the company itself generates about a 7% earnings yield, based on its share prices. Additionally, only 60% of the cash generated is returned to shareholders as dividends. This conservative financial strategy might not be in the best interests of its investors, as they could potentially benefit more from a more aggressive reinvestment or distribution policy.
