Saturday, May 04, 2013

PETALING JAYA: Luck was not on Genting Singapore’s side in the January-to-March quarter as a dip in the casino operator’s VIP win rate led to double-digit declines in its revenue and earnings.

The company is also adopting a cautious outlook for the rest of the year, a departure from its past optimism, analysts said.

Although Genting Singapore, which is 52%-owned by Genting Bhd, saw its gaming volumes rise 38% to a record, it had a "weak hold" on those gaming dollars, with its win percentage of the premium segment dropping to 2.1% from 3.4% in the same quarter of last year, according to Affin Investment Bank.

As a result, Genting Singapore’s net profit and turnover slid 31.3% and 15% year-on-year to S$145.4mil and S$669.6mil, disappointing analysts.

Maybank Kim Eng downgraded the stock yesterday to a "hold" from "buy", but raised its target price to S$1.70 a share from S$1.67, saying the strong momentum in VIP volumes experienced in the first quarter may not last.

"Genting Singapore is cautious on VIP volumes and debt collections over the next two to three quarters due to the uncertain Chinese economy and China’s anti-money laundering policy," the brokerage said in a report.

Hong Leong Investment Bank Research also told clients that Genting Singapore was expecting lower growth from mainland Chinese patrons.

In addition, the Singapore Tourism Board had forecast a slowdown in tourist arrivals and spending due to regional competition and tight labour market, it said.

In the first quarter, Genting Singapore’s clientele ratio was 49:51 between VIP and non-VIP clients, while its market share of the rolling chip volume was 48% versus its sole rival Marina Bay Sands’ 52%.

Daily average visit to Resorts World Sentosa’s newly launched Marine Life Park numbered 7,400 during the three-month period against 7,100 in the preceding quarter.

Universal Studios Singapore reported lower average daily visits of 8,400, which was flat year-on-year and down from 11,100 in the last quarter of 2012.

Its hotel occupancy rate improved to 92% from 91% in the final quarter of 2012 and 86% in the first quarter of last year. However, its average hotel room rate fell to S$404 from S$447 in the preceding quarter, against S$338 year-on-year.

"We believe our forecast may be a tad too bullish against a backdrop of credit tightening in mainland China," Affin said in its results update note.

"Thus, we are downgrading Genting Singapore’s fiscal 2013-2015 earnings per share by 18%-20%. Genting Singapore accounts for 47% of our 2013 Genting earnings before interest, taxes, depreciation, and amortisation and we will likely trim Genting’s 2013 and 2014 core net profit by 9% and 8%, respectively, pending its first quarter results on May 30."

Nonetheless, analysts see a potential catalyst in Japan’s gaming market, which may soon be liberalised. This would be a greenfield investment should it pan out in Genting Singapore’s favour.

According to Maybank, the pro-casino Liberal Democratic Party, which was returned to power last December when it gained control of the lower house of the Diet, is widely expected to gain control of the upper house following an election in this house on July 11.

"Genting Singapore is confident that a casino bill will be passed in November, with licence bidding to commence three to six months thereafter. We understand that it is a leading contender for one. We will review our call on Genting Singapore towards the third quarter if Japan liberalises its casino industry then," the research outfit said.

The counter shed 12.5 cents to S$1.49 yesterday while its parent fell 51 sen to RM9.99 amid a weak local market.

By http://biz.thestar.com.my