Results

Genting Singapore’s (GenS) FY13 core PATAMI of SG$501.1m came in within our expectations but shy of consensus, accounting for 95.3% and 83.1% respectively.

Deviations

None.

Dividends

Declared final cash dividend of 1 cent, in line with ours estimate. We continue to foresee GenS to declare dividends at similar quantum in FY14.

Highlights

4Q continued to be a VIP-quarter, with 57% of its gross gaming revenue (GGR) from VIP, lifting FY13’s VIP share contribution to total GGR to an average of ~54%. Hold rate however were lower in FY13 (~2.51%) compared to FY12 of ~3.08%.

Mass market continued to decline further (albeit marginally) due to flattish volume and lower win rate. Weakening in regional currency vs. SG$ also contributed to the flattish mass market volume.

Non-gaming revenue continued to record healthy growth as FY13 reflects the full year contribution of Marine Life Park (which was opened in 4QFY12).

On Japan’s side, the integrated resort (IR) promotion bill has been submitted to the Diet and is expected to be passed in end May-June. Management do not expect construction works to start until FY17.

GenS is excited about its latest venture into Jeju Island (50% JV) given that this enables creation of synergies with the operations in Singapore by building a stronger and wider customer database. Management is expecting the agreement to complete next month.

However, probability of success is still uncertain given that it is no clear whether the casino is open to locals or only foreigners. Should everything goes as planned, the construction of the casino in Jeju Island could potentially begin as early as 3QFY14.

Besides Japan and Korea, GenS mentioned that it will continue to keep an eye on one to two more international ventures to further boost GenS’ earnings in the future.

Risks

1) Regulatory risk; 2) Further decline in RWS’ market share to MBS; 3) Weaker-than-expected hold percentage in the VIP segment; 4) Worsening in economic condition; and 5) Failure in casino license renewal.

Forecasts

Unchanged.

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 FY15 EV/EBITDA multiple of 9.5x.

Source: Hong Leong Investment Bank Research - 21 Feb 2014