Highlights

Las Vegas Sands’ Singapore property Marina Bay Sands (MBS) released its 4QFY13 results with EBITDA of US$258.8m or SG$328.7m (-14.4% yoy; -30.7% qoq). FY13 EBITDA totalled US$1.38bn or SG$1.75bn (+1.3% yoy).

Rolling chip volume stayed flattish qoq but declined doubledigit yoy by 16.6%. Despite that, management is still pleased with the total visitation to the property.

The poor performance were largely affected by low VIP hold rate of only 1.92%, meanwhile hold rates for mass and slots remained consistent.

Consequently, margins were compromised. MBS’ recorded the lowest EBITDA margin in history at 39.2% in 4Q. According to the management, assuming at theoretical hold rate, MBS would have recorded an EBITDA margin of 47%.

As to the implication of MBS’ results to Genting Singapore (GenS), assuming of similar market share as 3QFY13, GenS would record a rolling chip volume of circa SG$20.2bn (+12.8% yoy; -1.8% qoq). Full year rolling chip volume would total to SG$80.7bn, a magnificent growth of 35.4% yoy.

Gaming operations aside, we are maintaining our view that its non-gaming operations would experience another encouraging growth (especially Universal Studio, USS and Marine Life Park, MLP) due to seasonality as 4Q normally records the highest non-gaming revenue compared to other three quarters. Furthermore, FY13 is the first financial year where GenS record the full impact of MLP, which opened in 4QFY12.

All in all, we believe GenS’ FY13 results (to be released on 20 Feb 2014) would be within expectations, provided that VIP hold rate does not deviate much from its average hold rate for 9MFY13 of 2.5%. However, we believe consensus is slightly too bullish on GenS’ earnings outlook as well as average VIP win rate for FY13.

Risks

• Regulatory risk
• Further decline in RWS’ market share to MBS
• Weaker-than-expected hold percentage in the VIP segment
• Worsening in economic condition
• Failure in casino license renewal.

Forecasts

Unchanged for now, pending results release on 20 Feb 2014.

Rating

BUY

Positives – (1) Duopoly industry; and (2) Lower tax rates compared to regional peers.

Negatives – (1) Highly regulated industry; and (2) Earnings from gaming operations are highly dependable on luck factor and hold rates.

Valuation

Maintain BUY with unchanged TP of SG$1.67 based on 9.5x FY15’s EV/EBITDA.

Source: Hong Leong Investment Bank Research - 6 Feb 2014