Genting Singapore - CIMB Research 2015-10-22: MBS likely to take more market share

GENTING SINGAPORE PLC G13.SI

Genting Singapore - MBS likely to take more market share

3Q15 adjusted property EBITDA was US$389.7m (+7% qoq, +11% yoy).
Rolling chip volume grew 20% qoq and 25% yoy to US$11.4bn, the best quarterly performance since 1Q14.
Stronger performance at MBS may not translate into better figures at GENS’s Resorts World Sentosa (RWS), rather we expect MBS to gain market share.

MBS’s 3Q15 adjusted EBITDA grew 7% qoq and 11% yoy to US$389.7m. On a constant-currency basis, adjusted EBITDA increased 21% yoy. GGR was up 6% qoq and 8% yoy to US$738m, driven mostly by better VIP GGR (+13% qoq, +24% yoy) on higher rolling chip volume, although this was partially offset by a lower win rate of 2.61% (2Q15: 2.78%, 3Q14: 2.64%). Mass GGR rose 2% qoq but fell 1% yoy on the impact of a stronger US$ (+8% yoy on constant-currency basis).

The big surprise this quarter was the strong rolling chip volume of US$11.4bn, up by 20% qoq and 25% yoy; it rose 36% yoy on constant-currency terms. This marks the best quarterly volume in the past six quarters. Management attributed the performance to its success in bringing in customers from the region. While the very high-end segment is seeing falling visitation from China, this was offset by players from Indonesia and Malaysia and Chinese PRs in Singapore.

Mass win per day grew 1% qoq but fell 1% yoy to US$4.77m in 3Q15; it increased 8% yoy on constant-currency terms. The growth was attributed to better contribution from non-rolling slot and electronic table games and its success in attracting premium mass players from Malaysia, Indonesia, Korea and Japan. MBS is targeting more mass players in the US$20k-40k range from neighbouring countries.

We believe the strong operating performance at MBS this quarter does not necessarily translate into better results at RWS. On the mass gaming side, RWS could see light tailwinds from its newly-opened Genting Hotel Jurong. However, MBS remains the market leader in the mass segment given its superior location and larger availability of hotel rooms around the Marina Bay area vs. Sentosa.
On the VIP side, RWS continues to tighten credit extension in light of the worsening credit environment while its business is more dependent on Chinese visitation, with Chinese accounting for about 50% of GGR. We expect RWS’s rolling chip volume to remain under pressure in 3Q15, although a better VIP win rate could help to lift VIP GGR after four consecutive quarters of win rates below its historical average.

We maintain our Hold call, with earnings at RWS to come under pressure as it shifts its focus from VIP to the mass segment, where MBS has the competitive advantage. Our DCF-based target price is also maintained at S$0.81.

Jessalynn CHEN CIMB Securities | Kenneth NG CFA CIMB Securities | http://research.itradecimb.com/ 2015-10-22

CIMB Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.81 Same 0.81