Another record low EBITDA. GENS’ 3Q12 results disappointed with a new record low EBITDA of SGD303.2m (-19% YoY, -1% QoQ) on lower VIP volume and win rate YoY and QoQ. Resorts World Sentosa (RWS) continues to lose share of VIP volume and provision for doubtful debts remains uncomfortably high. We lower our earnings estimates by 7-9%. Maintain HOLD but tweak TP to SGD1.35 (+3%) as we roll forward our valuation basis to end-2013.

Below expectations. 3Q12 core net profit of SGD133.5m (-38% YoY, - 4% QoQ) brought 9M12 core net profit to SGD495.5m (-35% YoY) which was below expectations at 70% of our full year estimate and below consensus at 66% of consensus estimate. 9M12 revenue of SGD2.2b (-11% YoY) was marginally below expectations at 73% of our 2012 estimate. No dividends were declared in the current quarter.

Lower VIP volume and win rate YoY and QoQ. 3Q12 core net profit was down 38% YoY as (i) VIP volume fell 20% YoY and (ii) the VIP win rate of 2.8% was c.40 bps lower YoY. Offsetting this is provision for doubtful debts that fell 44% YoY to SGD32m. 3Q12 core net profit was down 4% QoQ as (i) VIP volume eased 3% QoQ and (ii) the VIP win rate of 2.8% was c.30 bps lower QoQ.

Prospects not improving. Although RWS’ share of VIP volume was boosted to 49% in 1Q12 due to the opening of the 194-room Equarius Hotel and Spa Villas, it eased to 47% in 3Q12 likely due to the departure of some key staff. While 3Q12 provision for doubtful debts of SGD32m was down 44% YoY, as a percentage of VIP gross gaming revenue (GGR), it is at an uncomfortably high 9%.

Maintain HOLD but tweak TP to SGD1.35 (+3%). We lower our FY12- 14 earnings estimates by 7%/8%/8% to reflect a lower share of VIP volume of 47% (50% previously) and higher percentage of VIP GGR provided for of 8% (6% previously). Rolling forward our valuation basis and ascribing an unchanged 11x 1-year forward EV/EBITDA (Macau casino average) we tweak our TP up slightly to SGD1.35 (+3%).

Source: Maybank Kim Eng Research - 14 Nov 2012