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Genting Singapore - Decent Showing

kiasutrader
Publish date: Wed, 06 Nov 2013, 07:30 PM
kiasutrader
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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
Genting Sing (G13)
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