Towards Financial Freedom
Genting Singapore - Implications of MBS' 2QFY14 results BUY
- Las Vegas Sands Corporation (LVS) announced its 2QFY14 results yesterday. LVS' results were below street estimates mainly due to a fall in VIP volume in Macau. Its subsidiary, Marina Bay Sands (MBS) reported an EBITDA of US$417.8mil in 2QFY14 on the back of revenues of US$646.4mil.
- MBS' results revealed that volume of business in the VIP and mass market segments had deteriorated in 2QFY14. Volume of MBS' VIP business continued to contract for the fifth consecutive quarter.
- We believe that there has been a drop in wagers by players from China. They account for a significant portion of VIP revenue in Singapore.
- Comparing 2QFY14 against 1QFY14, MBS' casino turnover declined 5.0% to US$646.4mil due to a decrease in the VIP volume, which was partly offset by a small rise in the win percentage. EBITDA margin edged down from 52.1% (45.2% if win percentage was normalised) in 1QFY14 to 51.9% (45.8% if win percentage was normalised) in 2QFY14.
- Volume of MBS' VIP business shrank by 19.3% from US$12.9bil in 1QFY14 to US$10.4bil in 2QFY14. Win percentage of the VIP segment inched up from 3.41% in 1QFY14 to 3.45% in 2QFY14.
- Volume of mass market segment eased 4.4% QoQ to US$1.1bil in 2QFY14. Win percentage of the mass market was 24.8% in 2QFY14 versus 23.4% in 1QFY14.
- Provisions for casino receivables remained stable at US$33mil in 2QFY14. Provisions were about 5.1% of casino revenue in 2QFY14 compared with 5.3% in 1QFY14.
- Genting Singapore (GenS) is scheduled to release its results before 15 August 2014. Although MBS' weak financial report is a negative read-through for GenS, there have been instances when the quarterly results of both casino resorts diverged.
- Maintain BUY on Genting Singapore (GenS). We believe that GenS would be one of the frontrunners for a casino licence in Japan. Legislators in Japan are expected to pass the casino law in September/October this year.
Source: AmeSecurities
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