Genting Singapore (SGX: GENS) shares actually fell 7% today on their profits report. Which is a bit of a surprise as quarterly profits actually tripled - yes, up by three times. The travel recovery is happening, people are visiting the resort and casinos, things are going great. But less great than the general audience out here thought they were going to go, therefore the share price fall. Expectations were running ahead of reality that is.
As we've noted before about Genting Singapore the business relies upon leisure travel. In SE Asia that means travel from Mainland China beyond all else. So, there's a definite connection between economic conditions on the Mainland and how a resort and casino operation in Singapore is going to do. We've also seen Genting peak a bit before as thoughts about how large that return to travel is going to be. It's obvious that things are improving but how much are they going to improve that is?
It's not just economic issues of course. There have been travel bans in the area recently - for obvious reasons. So, there's always that worry that if behaviour is curbed by law - lockdowns and all that - will it bounce back? That is, will forced changes in behaviour become permanent changes or merely cyclical ones? Lockdowns in other places seem to have caused cyclical changes in online shopping - largely now back to trend - but structural changes in commercial office space usage. So, something like leisure travel could work either way, it's something that has to be seen to find out.
Genting Singapore share price from SGX
From the latest results it's clear that yes, travel is returning. So is the willingness to spend in the resort and casinos. That's what has driven up Genting profits by 300% and more. Genting revenues were up by a more modest 54% - the greater rise in profit is because, of course, there are certain expenses that don't scale with output. Hey, it's a good result, the business idea has survived the test.
But of course the shares fell on these results. For Genting's results were a disappointment to the market. The expectation was that they would be even better than this.
Which does bring us to that old stock market saw. Buy the rumour, sell the fact. It was obvious that Chinese leisure travel was returning, this would boost Genting. The only question was by how much? So, GENS rose before the results and, as often happened, by more than the results justified. Buying into the rumour of increased traffic and profits made money. The actual event of the results not so much. Buy the rumour, sell the fact.