• Core NPAT 73% above forecast
• 2014 outlook remains cautious
• Upgrade on valuation ground

Strong start to FY14

Genting Singapore (GS) reported its 1Q14 results last evening, with revenue jumping 24% YoY and 20% QoQ to S$828.8m, or 4% above our forecast, aided by better-thanexpected win percentages (VIP hold rate hit 3.0%, at the upper end of the theoretical range), which also resulted in adjusted EBITDA jumping 60% YoY and QoQ to S$400.3m (48.3% margin versus 36.1% in 4Q13 and 37.3% in 1Q13). NPAT surged 97% and 63% QoQ to S$228.5m; core NPAT of S$207.2m was 73% above our S$120m estimate.

But outlook remains cautious

Despite the record numbers in 1Q14, management remains largely cautious for the rest of 2014. For one, it is not optimistic that the mass market will have any significant growth in the next few months, mostly due to the continued strength of the SGD against the regional currencies. And for the VIP segment, GS notes that it is still heavily dependent on the region, and the outlook remains quite uncertain, citing the slowing Chinese economy as well as the presidential election in Indonesia. Nevertheless, management did reveal that it has achieved a greater diversity of VIP customers, which it also credited for its outperformance against rival MBS in 1Q14.

Expansion is on-track

During the call, GS updated that its JV in Jeju Island is on track – it is in the process of submitting its plan to authorities and expects to get its building permits to start construction in Jul. Adds that the resort will come with 2,800 rooms and is aiming for a soft opening in early 2017. Separately, its Jurong hotel is also progressing well and projects for the 150-room development to have a soft opening around mid 2015.

Upgrade to BUY with S$1.43 fair value

Even though 1Q14 core NPAT met 34% of our original full-year forecast, we are only bumping up our estimate by 2%, given the still cautious outlook. As such, our DCFbased fair value remains unchanged at S$1.43. But we upgrade our call to BUY on valuation grounds.

Source: OCBC Research - 6 May 2014