Genting Singapore - CIMB Research 2015-12-09: Slipping market share

Genting Singapore - CIMB Research 2015-12-09: Slipping market share GENTING SINGAPORE PLC G13.SI 

Genting Singapore - Slipping market share 

  • GENS’s Resorts World Sentosa (RWS) continues to lose market share to Marina Bay Sands (MBS) across both VIP and mass gaming segments. 
  • We expect this trend to continue as RWS cuts back on credit extensions to VIPs, while MBS has the location advantage for mass. 
  • Bad debt charges expected to remain high until 2H16, weighing on earnings. 
  • Maintain Hold, given the challenging outlook in the VIP gaming segment. 

■ VIP – diverging trend from MBS to continue 

  • 3Q15 saw a sharp divergence in VIP gaming trends – competitor MBS reported the best rolling chip volume in six quarters of S$15bn (+20% qoq, +36% yoy in S$), while RWS saw the opposite, with its rolling chip volume falling 20% qoq and 50% yoy to S$9bn. This dragged RWS’s market share to a new low of c.40%, and we expect the trend to continue. 
  • Management explained that unlike Sands, its disadvantage is not having a presence in other VIP gaming markets to better gauge customers’ creditworthiness. 

■ VIP market share to erode further; bad debt to remain high till 2H16 

  • Looking into 2016, management guided that it will continue to scale back the VIP business by tightening credit extension, in line with a new norm. 
  • It does not expect to see an upturn in VIP business from China anytime soon but continues to pursue business from ASEAN customers. As such, we expect RWS to continue to lose VIP market share to MBS in the quarters ahead. 
  • We also expect bad debt charges to remain high until 2H16, as it continues to provide for credit extended 12-18 months ago. 

■ Mass – a little more hope 

  • RWS’s market share of mass GGR has slipped to 40%, despite the opening of the 550- room Genting Hotel Jurong (GHJ). 
  • GENS is in the process of realigning management in its mass and premium mass segments, as it shifts focus away from VIP to mass. 
  • We think more targeted efforts to draw in visitors from ASEAN could drive an improvement in RWS’s market share ahead, though upside could be limited as MBS continues to have the competitive advantage in location and availability of hotel rooms nearby. 

■ Resorts World Jeju (RWJ) a longer-term positive 

  • RWJ is slated to open progressively from 2017, with completion target of 2019. 
  • RWJ will feature a Myths & History Theme Park, an Adventure Water Park, a retail and F&B complex, >2,000 hotel rooms, a foreigner-only casino and >2,8000 residential units. 
  • While it has yet to receive a casino license, management is hopeful as the Jeju governor is in support of RWJ’s plans. 
  • Given Jeju’s unique visa-free policy, RWJ’s target market is Northern China. In 2014, Jeju received 2.9m Chinese tourists (Singapore: 1.7m). 

■ Maintain Hold 

  • We maintain our Hold call on GENS, with an unchanged DCF-based target price of S$0.81. 
  • We expect the environment to remain challenging for GENS, at least in 1H16, with 2H16 to see some reprieve from lower bad debt charges. 
  • We advise investors to remain on the sidelines pending clearer signs of a bottom.

Jessalynn CHEN CIMB Securities | Kenneth NG CFA CIMB Securities | http://research.itradecimb.com/ 2015-12-09
CIMB Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.81 Same 0.81