Genting Singapore - Decent Showing

kiasutrader

Publish date: Wed, 06 Nov 2013, 07:30 PM

GENS' 9M13 core earnings of SGD497.2m came in above both consensus and our expectations on better-than-expected recovery in its premium win rates in 3Q13. Taking that into account, we upgrade our FY13F earnings by 6.2% while leaving our FY14F and FY15F numbers unchanged. Maintain NEUTRAL, with our FV tweaked toSGD1.49 (from SGD1.38).

Improved win rates.GENS' 9M13 revenue was flattish at SGD2.15bn despite a record high in its VIP volume (+39.3% y-o-y). This was due to subpar premium win rates, which averaged at 2.5% against the 2.85% theoretical hold rate. Core EBITDA, meanwhile, dipped 8.5% y-o-y to SGD907.9m on higher opex, with its impairment loss on receivables ballooning 27.5% y-o-y to SGD127.3m. All in, however, 9M13 core earnings of SGD497.2m trumped expectations at 80.5% and 84.7% of our and consensus full-year estimates respectively. This was due to a better-than-expected recovery in its VIP hold ratesin 3Q13, which came in at 2.9-3% (1H13: 2.3%) and our previous full-year forecast of 2.6%.
Turning bullish. To our surprise, GENS' management turned bullish on its near-term outlook. This was in view of its continued growth in VIP volume - arising from an increase in gamblers coming from China as well as South-East Asia - on top of the recovery inits VIP hold rates.
Developments in Japan are likely come 1Q14.We gathered that the pro-casino group of Japanese lawmakers aims to formally introduce the casino bill before the end of the current Diet session on 6 Dec. We foresee more developments on this come 1Q14, as sources suggest that the bill will be debated during the next session inJan 2014.
Maintain NEUTRAL. In view of the earnings surprise, we are upgrading our FY13F core earnings estimate by 6.2% by tweaking our luck factor. Given that GENS' gaming peers in Macau are now trading at 14.4-15.6x FY14 EV/EBITDA, we are pegging a higher FY14 EV/EBITDA of 11.0x (from 10.0x) to GENS. Hence, our FV now stands at SGD1.49 (from SGD1.38). We deem the implied 25% discount to its peers in Macau as fair, in light of Singapore's relatively more stringent regulatory control on the gaming industry, which translates into slower industry growth.

Financial Exhibits

Leveraging on the gradually maturing Resorts World Sentosa operations
Strong cash-generating nature as capex trends lower
Sturdy balance sheet with further room for leverage
Growth to be driven by its casino operations

SWOT Analysis

Operates Resorts World Sentosa in Singapore, one of the two casinos in the country

Company Profile
Genting Singapore (GENS) owns and operates Resorts World Sentosa (RWS). RWS, Singapore's first integrated resort costing over SGD6.5bn, sits on a 49-hectare site on the island of Sentosa.

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Source: OSK

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