Billions of bad debts put Gentings' VIP margins at risk

Provisioning will stay high in 2015.

Gentings' VIP margins are at risk from billions of direct credit extended to VIP players in 2014.

According to Macquarie, Genting had S$1.1bn accounts receivable from VIP players by the end of 2014. This was a product of its strategy to increase market share while Marina Bay Sands adopted a more conservative strategy.

"Given the crackdown in China, we believe most of these receivables are fast turning into ‘bad debts’ and that GENS’ provisioning will remain high in 2015E. GENS provided for S$262m in bad debt in 2014 (+42% YoY), almost all of the VIP EBITDA, according to our analysis, and we think these elevated levels will continue in 2015E," stated the report.