Genting Singapore’s strong net cash position gives it a clear advantage in the race to win one of three Japan IR licenses on offer, according to Maybank Kim Eng Holdings Ltd regional gaming analyst Samuel Yin Shao Yang.
In an interview with The Edge Markets, Yin suggested Genting was in better shape than many of its Japan rivals due to the conservative nature of local authorities and concerns over a potential US-China trade war.
“Las Vegas Sands Corp and many other American casino operators are mostly in a net debt position, but Genting Singapore is huge in net cash. For that, the Japanese would probably prefer them,” he said, pointing to cash flow problems experienced by Las Vegas Sands during the 2009 Global Financial Crisis that led to a temporary pause on the construction of Macau IR Sands Cotai Central.
“This time around, given that there may be another GFC brewing with the ongoing trade war, the Japanese probably want to work with someone who is in a net cash position. So, Genting will be in a favorable position.”
According to Bloomberg information, the four big US operators – LVS, MGM Resorts, Wynn Resorts and Caesars Entertainment – are all in a net debt position with Caesars and Wynn holding a net debt-to-shareholders’ equity ratio of 5.25 times and 3.97 times and LVS and MGM having debt-to-equity ratios of more than 100%.
In that regard, Macau’s Galaxy Entertainment Group looms as a strong contender due to its own net cash position although it “might have some disadvantages because China and Japan are not the best of friends at the moment,” says Yin.
“Singapore is [also] quite stringent on social safeguards for casinos. Japan has been making so many references to Singapore’s casino model that I almost lost count. But to me, being in a net cash position is another plus point.”