GENTING SINGAPORE PLC
G13.SI
Genting Singapore (GENS SP) - VIP market troubles; D/G to HOLD
- 3Q15 results disappointed on record high doubtful debts. VIP volume share unlikely to recover, in our view.
- Cut EPS estimates by 8-29% and EV/EBITDA based TP from SGD0.86 to SGD0.78.
- Downgrade GENS from BUY to HOLD. Prefer GENT for cheaper valuation and earnings growth from its power segment.
What’s New
- 3Q15 core net profit of SGD69.3m (-22% YoY, +1% QoQ) brought 9M15 core net profit to SGD205.2m (-54% YoY), which was below our expectation at 50% of our full year estimate. That said, 9M15 revenue of SGD1.9b (-17% YoY) was within our expectation at 76% of our full year estimate.
- The earnings shortfall was due to 3Q15 provision for doubtful debts hitting a new record of SGD92.5m. On 3Q15 gaming operations, we observed the following:
- VIP volume share fell 7ppts QoQ to 40% as GENS was wary of doubtful debts, and did not extend much credit to Chinese VIPs; and
- mass market gross gaming revenue (GGR) share eased 1ppt QoQ to 40%, despite Genting Jurong Hotel growing room inventory by 36% when it opened seven months ago.
What’s Our View
- Going forward, GENS expects to be less generous in extending credit to Chinese VIPs and also expects provisions for doubtful debts to remain high until 2Q16 (please see p. 4 for more details). Therefore, we cut our FY15/FY16/FY17 EPS estimates by 29%/18%/8% to reflect lower VIP volume share and more provisions for doubtful debts.
- Ascribing an unchanged 8x EV/EBITDA to our FY16 estimates, we cut our TP from SGD0.86 to SGD0.78.
- Due to its poor results, we expect GENS’ share price to retreat. We downgrade GENS from BUY to HOLD. We prefer its 52% shareholder, Genting Berhad (GENT MK, BUY, TP: MYR9.20), as a cheaper alternative earnings growth from its power segment from 2017 onwards.
Yin Shao Yang
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2015-11-13
Maybank Kim Eng
SGX Stock
Analyst Report
0.78
Down
0.86
