What is the news?

GENS reported 3Q12 results.

GENS reported revenue of S$671.2 mil (-3% y-y, +10% qq) versus S$801.8 mil in the same period, a year ago. Profit from continuing operations was S$138.4 mil (-34% yy, -16% q-q) compared to S$209.5 mil in 3Q11 and S$165.5 mil in 2Q12. Net profit attributable to equity shareholder was S$110.3 mil (-47% y-y, -20% q-q). Results were below our expectations.

GENS 9MFY12 reported revenue was S$2.16 bil, 11% lower compared to S$2.4 bil in the same period, a year ago. NPAT fell by 32% y-y from S$740.2 mil to S$501.8 mil.

How do we view this?

Results were negatively impacted by significantly higher operating expenses and relatively low hold rates. Gross gaming volume for both mass and VIP market fell sequentially, by 3%.

The outlook for Singapore gaming sector remains challenging as the IRs are dependent on gamblers from China, which is experiencing slower growth. Stricter legislations to curb locals from gambling had also resulted in lower visitations.

Investment Actions?

GENS earnings in 3Q12 were below our expectations. 3 cents were shaved off our fair value as we adjusted our forecast to reflect the latest quarter results. We maintain our neutral call on GENS with fair valuation of S$1.15 based on 11x EV/EBITDA.

Source: PhilllipCapital Research - 14 Nov 2012