• Results within expectations
• Focus on premium mass…
• While loosening VIP credit

Adjusted EBITDA Flat YoY

Genting Singapore’s (GS) 3Q18 results were within expectations. 3Q18 revenue was up 1% YoY at S$639.1m, while 3Q18 gross profit was flat YoY at S$305.3m. Other operating expenses dropped 97% YoY from S$39.9m to S$1.2m, mainly due to a S$35.7m net forex loss in 3Q17.

As a result, 3Q18 net profit increased 25% YoY to S$210.4m. Since GS’s perpetual securities have been fully redeemed, PATMI increased 46% YoY to S$210.4m or 27% of our initial full-year forecast. 3Q18 adjusted EBITDA was flat YoY at S$318.8m, or 24% of our initial full-year forecast.

Gaming Business Remains Stable

Gaming revenue dropped 1% YoY during 3Q18. Feedback given was that GS’s mass gaming business remains stable while VIP rolling volumes showed robust growth. GS plans to continue loosening credit while maintaining a cautious stance and keeping an eye on the US China trade war.

We note that the impairment of trade receivables has increased sequentially from S$9.5m in 1H18 to S$12.9m in 3Q18 but is still 8% below the 3Q17 level. We see current levels as being very manageable. Given the macro uncertainties, management is planning to focus on regional premium mass customers while growing VIP rolling volumes with a measured credit risk appetite.

Events Complement Robust Non-gaming Growth

On the other hand, GS’s non-gaming businesses posted healthy top-line growth of 9% YoY during the quarter. RWS achieved an average daily visitorship of >22K and saw an increase in average visitor spend across all offerings, led by an increase in S.E.A. Aquarium ticket prices.

Average hotel occupancy came in at over 97%. RWS continues to hold large-scale lifestyle events such as “RWS Street Eats” and “The Great Food Festival”. Together, these events attracted over 100K visitors. In addition, RWS will be premiering TARU, a Mandarin musical that has been a box-office hit in Korea, next month.

Continued Work on the Japan Opportunity

On the Japan front, GS is in communication with specific cities that have expressed an interest in having an IR, and engaged in discussions with stakeholders to understand the environment and the localities where such cities are involved.

Management guided that they will continue to exercise fiscal caution until there is further clarity of the structure and financing of their potential investment in Japan. After adjustments, our FCFE-based fair value remains at S$1.39. Maintain BUY.

Source: OCBC Research - 9 Nov 2018