Towards Financial Freedom
Genting Singapore - Strong VIP volume in 1QFY14 BUY
- We are upgrading our recommendation on Genting Singapore PLC (GenS) from HOLD to BUY with an unchanged fair value of S$1.50/share. Due to the recent fall in GenS' share price, our fair value now implies an upside of 14.5%.
- We believe that uncertainties over China's economy have already been reflected in GenS' underperforming share price. GenS' long-term profit growth is expected to be underpinned by "Resorts World Jeju", which is scheduled to open progressively in FY17F. GenS is targeting to open the hotel in early-FY17F.
- GenS' annualised 1QFY14 results were above our expectations and consensus estimates. However to be conservative, we are keeping our earnings forecast for GenS for now.
- GenS benefited from improvements in the VIP volume of business and win percentage in 1QFY14. In spite of this, we understand that growth in the volume of business for the mass market and VIP segments may not be sustainable going forward.
- This is due to a few reasons. First, regional economies are expected to be weak. Indonesia will be holding its elections this year while China is tightening credit. Also, the mass market is envisaged to be affected by the strength of the S$. Players from Malaysia are wagering less due to the depreciation of the RM against S$.
- In respect of "Resorts World Jeju", GenS is expected to start construction in July 2014. Ground-breaking ceremony is anticipated to be held at end-June or early-July 2014. GenS' capex for the integrated resort is estimated at US$1bil.
- As for Japan, the Lower House is expected to hold debate on the casino bill at the end of this month. After the bill is passed, it will be debated by the Upper House. GenS reckons that passing the bill in the Upper House will be challenging as the ruling party does not have a majority.
- Volume of VIP business at "Resorts World Sentosa" (RWS) rose 19% QoQ and 10% YoY in 1QFY14. Market share of RWS' VIP volume of business was 59% in Singapore in 1QFY14. We understand that RWS had successfully expanded its customer base. There have been new players coming from Indonesia and Thailand.
- Win percentage of the VIP segment rose to 3% in 1QFY14 from 2.5% in 4QFY13 and 2.12% in 1QFY13.
- Impairments for trade receivables remained stable at S$58.7mil in 1QFY14 compared with S$57.5mil in 4QFY13 and S$45.2mil in 1QFY13.
Source: AmeSecurities
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