OCBC Securities 2015-08-14: Genting Singapore - HOLD with lower S$0.81 fair value.

GENTING SINGAPORE PLC G13.SI

HOLD with lower S$0.81 fair value

 Adjusted EBITDA improved QoQ
 But outlook still pretty weak
 Maintain HOLD with lower S$0.81 FV

Genting Singapore (GS) saw 2Q15 revenue slipping 23% YoY (-10% QoQ) to S$578.1m, after its gaming revenue fell 28% YoY (-13% QoQ) to S$428.3m; this due to unfavourable global VIP premium business and rolling win percentage (2.1% versus 2.6-2.7% theoretical hold rate).
And as guided earlier, GS registered a fair value loss of S$95.0m in the quarter; it had also sold S$212.0m worth of financial derivatives.
And also because of a large forex loss of S$84.0m, GS posted a net loss (after perpetuals) of S$16.9m versus S$102.3m profit in 2Q14; and earnings would have been worse if not for a tax refund of some S$102.7m.

Still, on a theoretical normalized hold basis and excluding the one-off tax refund, adjusted EBITDA came in around S$270m, which is an 18% QoQ improvement.
For the first half, revenue also fell 23% to S$1217.4m, meeting 49% of our fullyear estimate, while reported net profit tumbled 86% to S$45.7m; core earnings would have come in around S$120.8m, or about 34% of our FY15 forecast.

Expecting the gaming industry to remain weak, management will maintain its cautious approach in granting credit to VIP players and also beefed up its collection process. GS says it will continue to focus on foreign premium mass and mass market segments in the region; but notes that the weakening regional currencies, especially the MYR and IDR, could weigh on growth in these segments.
Further afield, GS notes that the construction of the IR in Jeju, Korea, is progressing as scheduled; building works should commence early next year. Over in Japan, GS is hopeful that the IR Promotion Bill can be passed by the end of the year.

In view of the latest results, we are paring our FY15 core earnings estimate down by 18% (FY16 by 10%). Also incorporating a higher risk-free rate in our DCF model, our fair value slips from S$0.95 to S$0.81. Maintain HOLD on the stock.

Carey Wong | http://www.ocbcresearch.com/ OCBC Investment Research 2015-08-14

HOLD Maintain HOLD 0.81 Down 0.95