Genting’s (GENS) competitor, MBS reported its 2Q13 results on Wednesday’s night. Based on MBS’s results, Macquarie Equities Research (MER) released a research note early morning yesterday and reiterated its ‘Outperform’ rating on GENS, with a 12-month price target of $1.85. MER’s target price is 35% away from yesterday’s closing price of $1.37. Some excerpts from the research note are shown below.

MBS’s results showed a solid performance in VIP and mass market, which MER thinks bodes well for the performance of GENS in 2Q13.
 
Impact
MBS showed that VIP rolling chip volume grew by 24% YoY, after a 42% increase in 1Q (GENS saw a 40% increase in 1Q13). MER’s FY forecast for GENS' rolling chip volume growth is 10%, which MER thinks is easily achievable (in fact may provide upside surprise) given how 1H13 is panning out.
 
MBS' mass market revenues increased c.2% YoY in 2Q13. While weak, MER still thinks this bodes well for GENS. MER notes that in 1Q13, GENS outperformed MBS significantly with c.10% growth in mass market (vs MBS which grew mass revenues at 7%). Hence while MER expects that GENS' growth rates will decline from the 10% in 1Q, MER thinks that its FY growth expectation of 5% is still achievable.
 
The key for GENS will be how they rationalise their cost base at the property and raise margins.
 
MBS parent's management team were also optimistic on their prospects in Japan, stating that after lobbying the Government for 5 years, the current legislative set-up was the most promising for approving gaming legislation. MER sees this as positive for unlocking value at GENS.
 
Earnings season for GENS
GENS is scheduled to report its 2Q13 results on 6 August.

Source: Macquarie Research - 26 Jul 2013