Analysts dismissed the significance of a stock buyback program by Genting Singapore to pan the operator’s stock after shares sank to a four-year low. The results came after the company spent S.8 million ( million) buying back 58.6 million shares of stock.
According to a report in Bloomberg, the difference between Genting’s share price and analysts’ forecasts for the 12-month average price target decreased to S$1.24 from S$1.55 a year ago, compared to S$1.155 closing price the day of the report. At least nine analysts of the 21 covering the stock expect a 50 percent drop in quarterly profit.
“It’s good that Genting is returning cash to shareholders but the scale of the buyback is too small to have a meaningful impact,” said CLSA Hong Kong analyst Richard Huang in a Bloomberg interview. “Genting’s valuation isn’t that attractive compared to the Macau casinos. The company won’t have very exciting growth for the next few years because casino revenue in Singapore isn’t growing and the new casino projects in South Korea and Japan haven’t started.”
“The buyback does provide a perceived backstop for the stock,” added Sam Le Cornu, senior portfolio manager at Macquarie Funds. “That’s a sign of confidence on the part of management. They think the share price is too cheap. In the long term, the house will always win.”
The company also reported a 43 percent drop in Q3 net profit, but in a separate report, Maybank Kim Eng Holdings Ltd. predicted, “growth will be stable in the coming quarters.”
CLSA analyst Huang’s report cited continuing weakness in the VIP gaming segment thanks to the slowing economic growth in China and the government’s anti-corruption campaign as threatening to offset improvements in the mass gaming market. Visitors to Singapore declined 3.3 percent to 10.3 million in the eight months through August from a year earlier, he noted.
