Genting Singapore Limited. ("Genting Singapore") (SGX:G13, Financial)– During the quarter, the Fund initiated a position in Genting Singapore, a publicly-listed but controlled subsidiary of Genting Bhd. Genting Singapore owns and operates Resorts World Singapore, a family-oriented gaming and leisure resort on Sentosa Island. Every facet of the resort – Resorts World Casino, Universal Studios Singapore, S.E.A. Aquarium, a waterpark, hotels, restaurants and live entertainment – were effectively shuttered during the pandemic. However, a strong partnership with the Singapore government, resulted in substantial government financial support for resort and hospitality employees, leaving the company's financial position virtually undented throughout the crisis. Furthermore, Genting Singapore entered into the pandemic with a very large net cash position on its balance sheet, which remains the case today. The cash is theoretically earmarked for investment in two future projects, Resorts World Singapore 2.0 and a Japanese integrated resort similar to Resorts World Singapore. In the first case, the company intends to expand and enhance the existing operations in Sentosa, in collaboration with the Singapore government. Investment in a new Japanese integrated resort is far more theoretical as the Japanese government is currently issuing requests for proposals, considering several locations and narrowing its list of potential partners. At present, no commitments have been made by any party. We believe Genting Singapore's existing operations will return to normal levels of activity at some point in the next two years and that, based on conservative estimates of normalized operating cash flow, we are paying a price which offers a free cash flow yield5 comfortably into the double-digits. This type of valuation is very unusual for companies operating in this industry and for Genting Singapore itself, historically speaking. Further, our valuation ranges assign little if any value to future investments in either Singapore or Japan.
From Third Avenue Value Fund (Trades, Portfolio)'s first-quarter 2021 shareholder letter.
