Towards Financial Freedom
Genting Singapore - Implications of MBS' 4QFY12 results HOLD
- We are keeping our HOLD recommendation on Genting Singapore PLC (GenS) with a higher fair value of S$1.50/share versus S$1.35/share previously.
- We have raised the terminal growth rate in GenS' DCF (discounted cash flow) from 5% to 6% as the economic recovery in China should result in increased casino patronage from the country.
- Las Vegas Sands (LVS) reported its 4QFY12 results yesterday, which were below consensus estimates due to lower wins from Singapore and Las Vegas. However, the group's revenue beat expectations on the back of improvement from Macau.
- In spite of a lower win percentage YoY in 4QFY12, we consider Marina Bay Sands' (MBS) results to be impressive because of the strong recovery in the volume of VIP business.
- The volume of VIP business in 4QFY12 was the second highest in MBS' quarterly earnings history. Rolling chip volume surged 39.7% QoQ to US$16.5bil in 4QFY12. We believe that the recovery in the rolling chip segment could be due to seasonal factors.
- Win percentage in the VIP segment continued to be lower than the theoretical range for the second consecutive quarter.
- However on a QoQ basis, win percentage improved from 1.79% in 3QFY12 to 2.14% in 4QFY12. The win percentage in the rolling chip segment is usually between 2.7% and 3%.
- In the mass market segment, volume of business eased 2% from US$1.13bil in 3QFY12 to US$1.1bil in 4QFY12. Win percentage in the mass market segment was steady, inching up from 24% in 3QFY12 to 24.2% in 4QFY12.
- Hotel occupancy rate at MBS dipped marginally from 99.8% in 3QFY12 to 98.4% in 4QFY12. Average room rate inched up from US$361/day in 3QFY12 to US$368/day in 4QFY12.
- Looking at MBS' 4QFY12 results, we wonder if "Resorts World Sentosa" was able to capture the seasonal uptick in the VIP business in 4QFY12. In 3QFY12, MBS' market share of the VIP volume of business in Singapore was 53%.
- Going forward, GenS is expected to be affected by preoperating expenses in respect of its Marine Life Park and Aquarium. Hence, GenS' EBITDA margin is likely to remain under pressure until mid-FY13F.
Source: AmeSecurities
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