• Maintain NEUTRAL, SGD0.97 Target Price implies 1% upside with 4% FY20F yield.
• GENTING SINGAPORE (SGX:G13) reported 3Q19 adjusted EBITDA of SGD278m (-13% y-o-y) and PATMI of SGD159m (-24% y-o-y). 9M19 adjusted EBITDA of SGD902m is in line, at 77% of our full-year estimate.
• While non-gaming businesses performed well on increased tourist arrivals, the gaming segment remained challenging due to a higher levy, rising impairments, and competition from Marina Bay Sands and other regional players.
• Our forecasts and Target Price remain largely unchanged.

Gaming Segment Still Facing Some Challenges

• Genting Singapore's 3Q19 gaming revenue declined 11% y-o-y to SGD360m. During the quarter, mass gaming volumes continue to be negatively impacted by the increase in casino levy for Singaporeans and permanent residents. Although Genting Singapore saw incremental growth in foreign patrons, this was unable to offset the decline. We estimate mass gaming volume to fall 15% y-o-y in 3Q19.
• While we expect 3Q19 VIP volume to grow at mid-single digits y-o-y, this too was insufficient to pull up overall gaming revenue – as the group recorded a weaker VIP win rate of 2.7% this quarter (3Q18: 2.9%, 2Q19: 3.7%).

Still Cautious on Near-term Outlook

• Still cautious on near-term outlook as impairments and depreciations are expected to stay elevated at current levels.
• Declines in 3Q19 adjusted EBITDA and PATMI were attributed to higher impairments of trade receivables and accelerated depreciation charges. 3Q19 net impairment of trade receivables almost doubled from one year ago to SGD25m.
• We note that management has taken a more prudent stance in extending credit to VIPs since last quarter, and does not seem to be relaxing its credit terms in the near term. As such, we believe the current level of trade receivables impairments will be the new norm.
• We also do not expect a significant surge in VIP gaming volumes as a result of tightening credit.

Depreciation Expense Surged 43% YoY to SGD95m in 3Q19

• Management guided for depreciation charges to remain elevated at 3Q19 levels over the next five quarters, as it plans to retire certain assets ahead of its Resorts World Sentosa (RWS) 2.0 expansion plan.

Update on Japan Integrated Resorts’ (IRs) Timeline

• Genting Singapore is one the three bidders for the Osaka IR, and is now preparing for Yokohama’s request-for-concept.
• Management believes Osaka IR would announce its winner sometime in 3Q20, and Yokohama, in 4Q20. After this, it could take 6- 12 months to get the casino license from the Japanese government. As a result, the group believes it will not need additional funding until 2022.

Source: RHB Invest Research - 8 Nov 2019