Genting Singapore - RHB Invest 2015-11-13: Dragged Down By Bad Debts Provision

Genting Singapore - OCBC Investment 2015-11-13: Downgrade to SELL GENTING SINGAPORE PLC G13.SI 

Genting Singapore (GENS SP) - Dragged Down By Bad Debts Provision 

  • 9M15 core profit of SGD293.0m fell short of our expectations, at 64.6% of our full-year forecast as 3Q15 bad debt provisions jumped over 60% QoQ to SGD92.5m. 
  • Maintain TRADING BUY with our TP fine-tuned to SGD1.00 (from SGD1.02, 23% upside). 
  • Its VIP hold, however, recovered to register at the theoretical level of 2.8% during the quarter. 

 Results review. 

  • Genting Singapore’s 3Q15 revenue slipped 1.3% YoY to SGD636.1m as the decline in its VIP rolling volume of over 50% YoY was mostly offset by improvement in its VIP hold to 2.8% (3Q14: < 2.0%). 
  • Core profit, however, fell 16.3% YoY to SGD99.0m as the impairment loss on its receivables spiked 132.6% YoY to SGD92.5m. 
  • On a sequential basis, numbers are generally higher but core earnings closed flattish due to the resurgence in its bad debt provisions (+63.5% QoQ). 
  • All in, 9M15 core profit of SGD293.0m fell short of our but beat consensus expectations at 64.6%/82.5% of full-year forecasts respectively, as 9M15 bad debt provisions came in at SGD225.3m vs our previous full-year forecast of SGD220.0m. 

 Key highlights. 

  • While we are negatively surprised by the unexpected jump in its 3Q15 bad debt provisions, management expects to see improvements in the quality of its books come 2016, owing to the group’s stringent credit control as well as the tightening of its collection procedures over the past 9-12 months. 
  • In addressing concerns over the volatile nature of its holdings of derivatives and financial instruments, management indicated that most of its previously-outstanding positions have expired or been settled. 
  • Notably, its available-for-sale financial assets closed at SGD495.9m (-53.4% QoQ), while the derivative financial instruments under its current liabilities reduced to SGD54.5m (from SGD276.5m in 2Q15) as of end-Sep 2015. 

 Forecast revisions. 

  • We cut our FY15F-17F EPS by 2.6-8.5% by tweaking our bad debt provisions to be in line with its latest disclosures. 

 Maintain TRADING BUY. 

  • While we acknowledge that the operating environment remains challenging, we continue to believe the worst is likely over for Genting Singapore. It is currently trading at 5.9x 2016F EV/EBITDA, which implies an appealing discount of 41%/44% over its historical mean of/Macau gaming peers’ 10.0x/10.6x. 
  • Maintain TRADING BUY, with our SOP-based TP fine-tuned to SGD1.00 following our earnings revision.

Singapore Research Team RHB Research | 2015-11-13
RHB Research SGX Stock Analyst Report TRADING BUY MAINTAIN TRADING BUY 1.00 Down 1.02