Signs of stabilisation from MBS
- Many signs of stabilisation in MBS’s 2Q15 results. Expect GENS 2Q15 EBITDA of SGD275m (+20% QoQ).
- Raise EPS by 2-5% for GENS on lower depreciation. Lift SOTP based TP by 1% to SGD0.98.
- Still HOLD pending more evidence of stabilisation. Prefer Genting Malaysia (GENM MK, BUY, TP: MYR4.60) in the region.
What’s New
- MBS’s 2Q15 EBITDA came in at USD363.3m (-13% YoY, -13% QoQ). This was driven by a VIP win rate of 2.78%.
- As this was within its theoretical range, we see MBS’s 2Q15 EBITDA as a good indicator of its future quarterly EBITDA.
- We note a few positives for GENS from MBS’s results:
- MBS’s VIP volume was down only 6% QoQ (Macau: -12% QoQ),
- its rebate rate was stable QoQ at 1.34% of VIP volume,
- its bad debts fell to USD20m, their lowest since 2Q11; and
- its mass-market GGR was still flat QoQ.
What’s Our View
- MBS did not raise rebate rates, which would have cut margins. Yet, its VIP volume eased by a narrower percentage than Macau’s. This tighter credit policy also brought down its bad debts to a 4-year low.
- Mass-market GGR was, in addition, admirably flat QoQ despite new lows for ASEAN currencies against the SGD then.
- We expect GENS’s 2Q15 VIP volume to be flat QoQ at SGD12-13b and its rebate rate to be flat QoQ at 1.4-1.5% of VIP volume. That said, GENS did warn us that its 2Q15 bad debts could remain high at SGD70-80m.
- Assuming a VIP win rate of 2.85%, we expect a 2Q15 EBITDA of SGD275m, up 20% QoQ.
- We leave our EBITDA unchanged but raise EPS by 2-5% on lower depreciation.
- Accordingly, we lift our SOTP-based TP from SGD0.97 to SGD0.98.
- Although we are heartened by MBS’s 2Q15 results which suggest that the worst may be over for GENS, maintain HOLD pending more evidence of stabilisation.
(Yin Shao Yang)
Source: http://www.maybank-ke.com.sg/
