Genting Singapore shares surge on junket news

Singapore's Casino Regulatory Authority described the two operators - Huang Yu Kiung and Low Chong Aun - as international market agents who "will focus on bringing in foreign high rollers to our casinos."

"We see this positively as the other junket operators will know more about what the Singapore government is looking out for, so the process might get easier," said Carey Wong, an analyst at OCBC Investment Research. "Another positive thing is the credit risk. Now Genting doesn't have to extend so much credit to the high rollers because the junket operators typically offer their own credit."

Junket operators organize visits to casinos and provide credit to players in return for commissions from casino owners. Wong maintained a buy rating and us$ 1.59 share price target on Genting Singapore, which is controlled by Malaysian group Genting.

Genting Singapore shares were up 5.8 percent at us$ 1.725 in late morning trade after hitting us$ 1,39 - their highest since early November. It was the top traded stock by value and volume. Nearly 218 million shares were traded, more than three times the average full-day volume traded over the past 30 days.

The two casinos in Singapore - Genting's Resorts World Sentosa and Las Vegas Sands' Marina Bay Sands - are a significant source of tax revenue for the government and a draw for tourists from the region.

The Southeast Asian nation hopes to attract up to 10 percent more visitors this year, helped by an increase in cruise tourism, Second Minister for Trade and Industry S Iswaran said on Friday.

Wong estimated Singapore's gaming market last year was around us$ 4.5 billion and expected this to grow to us$ 5.2 billion this year due to more gaming tables and slot machines, a boost from the junkets and higher tourist arrivals. But he said Singapore is unlikely to outpace Macau because of the large number of casinos there and its location on China's doorstep.

DMG & Partners Securities said while the news about the junkets should help drive gambling volumes and lower Genting Singapore's credit risk, the small number of approvals and tighter regulatory restrictions may mute the benefits initially.

There may also be some duplication in the client base between the two junket operators and that of Genting Singapore's existing direct VIP customer base, it said.

Genting's Resorts World Sentosa made us$ 315.1 million in adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the fourth quarter, up from us$ 304 million million a year earlier. But its EBITDA was lower than the us$ 426.9 million reported by Marina Bay Sands for the three months ended in December.