• Stay NEUTRAL, new DCF-based Target Price to SGD1.02 from SGD1.08, 7% upside plus 3% FY19F yield.
• GENTING SINGAPORE LIMITED (SGX:G13)’s 1QFY19 core earnings of SGD207.8m (-4.4% y-o-y) are within our but above Street estimates. The y-o-y drop in core earnings was due to lower gaming volume, partially cushioned by lower costs.
• We tweak FY19-21 projections by 0-5.2%, imputing a lower VIP growth assumption, capex for the re-development of RWS as well as a minor model up-keeping exercise – which led to a lower Target Price.

GENS 1QFY19 Results Review

• GENTING SINGAPORE LIMITED (SGX:G13)'s 1Q19 core earnings of SGD207.8m (-4.4% y-o-y) are within our but above Street expectations, at 26.6% and 28.3% of full-year estimates.
• The y-o-y drop in core earnings was due to a lower topline (-5.1%), given the drop in gaming volume from the VIP segment. This, in turn, was due to its market share loss of 44% (1Q18: 49%). However, it was partially cushioned by higher volume from its mass business and lower costs. q-o-q, the improvement in core earnings (+28.8%) was driven by lower selling, distribution, administrative costs as well as depreciation charges.

Topline Growth May be Muted

• We understand that management has turned prudent in its credit extension, given the global geopolitical effect on the economy. Hence, we expect slower growth in topline, as its VIP market share is not anticipated to grow in the absence of a generous credit policy.
• On the non-gaming division, daily visitor arrivals were largely flattish y-o-y at 19,000 (4Q: 22,000) while the hotel occupancy rate was at 93%.

Update on Japan

• On the integrated resorts license in Japan, the request-for-concept (RFC) process is expected to start in August while the request-for-proposal (RFP) process is anticipated to be initiated by cities (November at the earliest) once the national guidelines are published.
• Management remains confident, given its track record in Singapore, and is deploying more resources to be seriously engaged in the competitive bidding process.

Update on Redevelopment

• The SGD4.5bn redevelopment includes two new immersive environments – Minion Park and Super Nintendo World, and a new Waterfront Lifestyle Complex housing two stylish hotels. Meanwhile, S.E.A. Aquarium will be expanded into the current Maritime Experiential Museum, to be rebranded as the Singapore Oceanarium.
• All facilities are expected to be ready by end-2025 with major capex spending expected in 2022-2023, with the exception of a SGD1bn land cost which is expected to be incurred in 2020 once the plans are finalised with the authority.

Forecast and Risks

• We tweak FY19-21 projections by 0-5.2% as we imputed a lower VIP growth assumption (in view of the now-tighter credit policy), capex for the re-development of Resorts World Sentosa as well as a minor model up-keeping exercise. As such, our DCF-derived Target Price for GENTING SINGAPORE LIMITED (SGX:G13) is lowered to SGD1.02 (WACC: 8.3%, TG: 0.5%).
• Key risks to our call include luck factor, market share contractions and a slowdown in tourist arrivals.

Source: RHB Invest Research - 10 May 2019