• Strong top-line and margin growth
• FV increases to S$1.32
• Re-iterate BUY

Adjusted EBITDA Up 152% YoY

Genting Singapore (GS) posted another impressive set of quarterly results this year. 2Q17 net profit attributable to ordinary shareholders jumped to S$143.3m, up from a S$10.5m net loss in 2Q16. This was contributed by a healthy 24% YoY growth in revenue to S$596.1m, which in turn was the result of a 33% jump in Gaming revenue. There was also a stark improvement in its 2Q17 gross profit margins from 19.3% in 2Q16 to 46.1%.

Despite the substantial increase in revenue, Administrative expenses and Selling & Distribution expenses each managed to drop 2% YoY to S$39.5m and S$13.4m, respectively. Adjusted EBITDA in 2Q17 jumped over 150% YoY from S$116.1m in 2Q16 to S$292.7m. 1H17 Adjusted EBITDA came up to the higher end of our expectations, at 53.7% of our initial full-year forecast.

Strong Operational Outlook in Both Gaming and Non-gaming Segments

We continue to be positive on the group’s initiatives to boost operating margins and keep receivable impairments low. These efforts, coupled with growing gaming revenues against a backdrop of increasing visitor arrivals (+3.6% YoY for Jan-May 2017), are expected to be the main driving force behind the strong EBITDA growth we project for the rest of the year.

As for the non-gaming segment, we note that Universal Studios Singapore (USS) has been voted the number one amusement park in Asia for the fourth consecutive year by TripAdvisor’s Travellers’ Choice. Given the ubiquity of online ratings as key factors in traveller decisions, we believe that the award both recognizes as well as promotes USS’s dominant position as one of the key attractions in the region.

GS’s hotel occupancy was over 95% this quarter, significantly above the mid-80% occupancy figures for the industry. In addition, culinary events such as “RWS Street Eats” and “The Great Food Festival” are expected to further boost Resorts World Sentosa’s (RWS) appeal to the premium mass market in 3Q17.

We are optimistic that RWS five-year roadmap to enhance destination appeal and adopt technological innovations will keep it ahead of the pack in the years to come. After making adjustments to our margin assumptions, our FCFE-based fair value increases from S$1.17 to S$1.32. We re-iterate BUY.

Source: OCBC Research - 3 Aug 2017