• Healthy EBITDA margins
• Final dividend of 2.0 S cents
• FV increases to S$1.45

Adjusted EBITDA Up 9% YoY

Genting Singapore (GS) posted a solid set of quarterly results to end off FY17. 4Q17 revenue increased 4% YoY to S$580.1m, supported by a 5% increase in gaming revenue and 2% increase in non-gaming revenue. Gaming revenue grew on the back of better VIP and premium mass volumes, while non-gaming revenue was supported by a 6-9% growth in daily average visitorship for GS’s major attractions as well as a stable occupancy rate of 91% for the hotels.

4Q17 adjusted EBITDA grew 9% YoY to S$255.1m with a margin of 44% for the quarter. FY17 revenue increased 7% YoY to S$2.4b or 99.4% of our full-year forecast, while adjusted EBITDA grew 48% YoY to S$1.2b.

Potential to Grow VIP Business Further?

GS has certainly reaped the benefits of a tighter credit policy in FY17. The impairment charge for trade receivables was only S$48.3m in FY17, compared to S$235.1m in FY16 and S$270.7m in FY15. The cost savings have contributed to a significantly healthier bottom line.

Given the robust VIP volumes, should GS choose to pursue a slightly looser credit policy, this may offer GS the potential to grow its VIP business more than proportionately to the increase in costs.

Innovation Plan to Bring Further Cost Savings in Medium Term

A final dividend of 2.0 S cents was declared (compared to 1.5 S cents the previous year), bringing the total dividends for FY17 to 3.5 S cents. This translates to a FY17 dividend yield of 2.7% against the closing price of S$1.30 on 23 Feb. Going forward, we expect EBITDA margins to remain healthy at around the mid-40% level, and note the opportunity to grow it further in the medium-term as GS embarks on its innovation plan to address challenges such as manpower constraints.

For the non-gaming side, we expect the reopening of Maritime Experiential Museum in Dec 2017 to be a positive for daily visitorship going forward. GS remains focused on the Japan IR opportunity and are optimistic that the IR Execution Bill will be tabled in this year’s Diet session.

After making adjustments, our FCFE based fair value rises from S$1.35 to S$1.45. We reiterate BUY.

Source: OCBC Research - 26 Feb 2018