Towards Financial Freedom
Genting Singapore - 1QFY13: Hit By Lower Win Rates
Genting Singapore's (GENS) 1QFY13 core earnings of SGD104.6m was below both our and consensus forecasts due to subdued premium win rates, despite its quarterly rolling volume closing at a new high. Taking that into account, we are lowering our FY13F net profit estimate by 15.0% while keeping our FY14F and FY15F numbers unchanged for now. Maintain NEUTRAL, with our FV reduced slightly to SGD1.46.
- Bottomline dragged down by lower premium win rates. GENS' 1QFY13 revenue dropped 14.9% y-o-y and 15.5% q-o-q to SGD669.6m,
despite its VIP rolling chip volume surging over 38.0% y-o-y to its highest quarterly volume ever. This was due to the fact that its premium win rates had averaged at a subpar 2.12% in 1QFY13 vs our previous assumption of 2.95%. Consequently, its core EBITDA dived 34.5% y-o-y and 32.4% q-o-q to SGD249.7m. Management indicated that the headline number would have been significantly higher at SGD400m, assuming a theoretical VIP hold rate of 2.85% for the quarter. All in all, GENS posted 1QFY13 core earnings of SGD104.6m, falling short of expectations at 13.4% and 13.9% of our and consensus full year estimates respectively. - Turning cautious. Management is turning more risk-averse in expanding the company's VIP segment in view of China's slowing macros - a far cry from its bullish optimism three months ago. We see some positives in this precautionary approach to optimize default risks as Chinese tourists make up more than half of its VIP income segment. This is also evident in its receivables, which have increased up by a relatively marginal 9.6% qo- q to SGD968.7m vis-à-vis the mid-teens growth in its VIP rolling chip over the period. 1QFY13's bad debt provisions stayed flattish at SGD45.2m compared to 4QFY12's SGD43.2m.
- Maintain NEUTRAL. Taking into account the lower win rates, we cut our FY13F core earnings estimates by some 15.0% to SGD663.1m, trimming premium win rate to 2.65% from 2.95% previously. We expect its luck factor to normalize in subsequent quarters, and hence leave our FY14F and FY15F numbers unchanged. That said, we tweak our FV slightly to SGD1.46 (from SGD1.47 previously) to factor in the lower target net cash balances in FY14F following our earnings revision. Maintain NEUTRAL.
Source: OSK
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