• We deem GENTING SINGAPORE LIMITED (SGX:G13)'s 1Q19 adjusted EBITDA of S$329.7m marginally below despite forming 27.1%/27.7% of our/consensus FY19F (S$1.21bn/S$1.19bn).
• The softness came namely from lower gaming revenues. More news on Japan Integrated Resort (IR) bid to emerge in 2H19F.
• Maintain ADD with a slightly lower Target Price of S$1.06, based on an unchanged 8x CY20F EV/EBITDA (close to -0.5 s.d. below mean).

Adjusted EBITDA Down Due to Softer Gaming Revenues

• GENTING SINGAPORE LIMITED (SGX:G13)'s 1Q19 adjusted EBITDA of S$329.7m was lower (-8.2% y-o-y), mainly due to softer gaming revenues (-15.2% y-o-y). COGS was up y-o-y to 54.8% of 1Q19 revenue (vs. 1Q18: 49.1%) partly due to higher trade receivable impairments (+22.6%), depreciation and opex expenses.
• See attached PDF report for Genting Singapore's y-o-y and q-o-q results comparison.
• All in, 1Q19 adjusted EBITDA margin was 51.5% (vs. 1Q18: 53.2%).

Gaming Market Share Softens

• We estimate 1Q19 VIP volumes fell to S$7.6bn (vs. 1Q18: S$9.6bn). Win rate improved to 3.3% (vs. 1Q18: 3.2%); hence, VIP gross gaming revenue (GGR) was at S$249m (vs. 1Q18: S$297m).
• Genting Singapore took 44.0% of the Singapore VIP rolling chip volumes (vs. 1Q18: 49%). We estimate 1Q19 mass GGR fell by 2.6% y-o-y on 39% market share (vs. 1Q18: 41.7%). The softness was largely due to global uncertainties that affected its top-end business, whilst mass sees medium-term competition from other regional peers

RWS 2.0 to Pay Off in the Long Term

• Genting Singapore reiterated its S$4.5bn capex for RWS 2.0, and said it still has no intention of an equity issuance as it believes operating cashflow is sufficient and capex will be spread out over five years (peak in FY22-23F).
• Genting Singapore believes the additional 1,100 rooms will not only improve hotel income but will enhance the tenure of its visitors, which should ultimately be better for RWS in the long run.

Japan Is Heating Up

• Genting Singapore mentioned that it will participate in Osaka’s Request-for-Concept (RFC) which is expected in the near future. The Request-for-Proposal (RFP) stage for the Integrated Resorts (IR) will likely emerge by end-FY19F and could close in 2Q20F, and we believe construction on any casinos could start in mid-FY21F.

Maintain ADD

• We trim our FY19-21F adjusted EBITDA as we reduce gaming revenues and increase our costs, and cut EPS due to higher depreciation. See attached PDF report for our forecast revision details.
• We also factor in the impact of voluntary prepayment of its outstanding S$680m of debt in FY19F. This leads to a lower Target Price of S$1.06, based on an unchanged 8x EV/EBITDA (close to -0.5 s.d. below mean).
• Potential re-rating catalysts are higher gaming revenues and margins.
• Downside risks are lower gaming revenues, higher trade receivable provisions and failure to secure any Japan opportunities.

Source: CGS-CIMB Research - 9 May 2019