Genting Singapore - RHB Invest 2016-05-16: Looking Ahead

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GENTING SINGAPORE PLC G13.SI 

Genting Singapore - Looking Ahead

• We continue to believe that the worst is likely over for Genting Singapore, as its VIP gaming segment is showing signs of stabilising. 
• While its bad debt provision unexpectedly jumped in 1Q16, we anticipate stringent credit controls to translate into lower impairments going forward. 
• Maintain TRADING BUY, with a TP of SGD0.91 (from SGD1.00, 15% upside).

Lower impairments likely. 

• We believe the pick-up in Genting Singapore’s 1Q16 bad debt provision (+103.8% QoQ) was likely a one-off, as management evaluates its receivables on a case-by-case basis. 
• We expect to see improvements in the quality of its books for the rest of the year, owing to the group’s more selective credit offerings and with its credit period shortened to 30 days effective March. 
• On a side note, gaming revenue is showing signs of stabilising, as both its VIP/mass volume expanded 4%/6% QoQ respectively. 
• Meanwhile, VIP hold closed slightly above average at 2.9% during the quarter.

Updates on South Korea. 

• On its proposed Resorts World Jeju, construction works are currently ongoing. Management indicated that initial take-up for the USD1bn worth of residential properties launched has been encouraging. 
• We expect the soft opening of the casino to take place earliest by end-2017.

Potential early redemption of perpetual. 

• Management highlighted the possibility of early redemption of its SGD2.3bn perpetual capital securities should there be further delays in the passing of Japan’s proposed gaming legislations. We believe this, if materialised, could be carried out in stages, as its first non-call option is to expire in Sep 2017. 

Forecasts and risks. 

• We trim our FY16-17 EPS by 12-14% as we lower both our VIP and mass volume growth to reflect the current cautious economic sentiment, which could impede gamblers’ appetite. 
• Key risks include the volatility in VIP win rates and potential weakness in tourist arrivals to Singapore.

Singapore Research Team RHB Invest | http://www.rhbinvest.com.sg/ 2016-05-16

RHB Invest SGX Stock Analyst Report TRADING BUY MAINTAIN TRADING BUY 0.91 Down 1.00