Genting Singapore - CIMB Research 2016-01-28: Opponent dealt the better hand

Genting Singapore - CIMB Research 2016-01-28: Opponent dealt the better hand GENTING SINGAPORE PLC G13.SI 

Genting Singapore - Opponent dealt the better hand 

  • Competitor Marina Bay Sands (MBS) reported decent 4Q15 operating data but headline figures were clouded by a lower rolling win rate and stronger US$. 
  • MBS’s VIP GGR fell 33% yoy on the back of a poor rolling win rate of 2.39% (4Q14: 3.58%). Rolling chip volume was up 1% yoy but fell 12% qoq to US$10.1bn. 
  • MBS’s mass GGR -4% yoy, slot GGR -3% yoy and non-rolling GGR -5% yoy in US$ terms. Mass win-per-day was up 6% yoy in S$ terms. 
  • We continue to expect MBS to take away GGR market share from RWS in the near term amidst further tightening of credit extension to VIPs and shift in focus to mass. 
  • We maintain our Hold call on GENS, with a lower DCF-based target price of S$0.73 after cutting FY15-17 EPS by 8-16% on expectations of lower gaming volumes. 

■ MBS’s decent 4Q15 operating data clouded by stronger US$ 

  • MBS reported 4Q15 adjusted EBITDA of US$375m, which was flat yoy excluding a US$90m property tax benefit in 4Q14; it grew in S$ terms (c.10% currency impact). VIP GGR fell 33% yoy on the back of a poor rolling win rate of 2.39% (4Q14: 3.58%), although rolling chip volume grew 1% yoy to US$10.1bn. Mass GGR fell 4% yoy, dragged by a 5% yoy fall in non-rolling table win-per-day and 2% yoy fall in slot win-perday. Mass win-per-day grew 6% yoy in S$ terms. Total GGR fell 17% yoy to US$338m. 

■ Expect divergence in rolling chip volume growth to continue 

  • 4Q15 is the second quarter that MBS has seen yoy growth in rolling chip volume (+1% yoy in US$ terms, higher in S$) after seven consecutive quarters of decline as a result of the anti-corruption drive in China. 
  • While MBS’s rolling chip volume appears to have stabilised and found a bottom, we think GENS’s Resorts World Sentosa (RWS) will still see pressure as it continues to scale back on credit extension to Chinese VIPs. 
  • We expect RWS’s market share of rolling chip volume to fall below 3Q15’s 38%. 

■ RWS likely to see further near-term loss in mass GGR market share 

  • MBS posted a new record high for mass win-per-day in S$ terms in 4Q15, which was up 6% yoy. We see this as a sign that RWS is likely to lose further mass GGR market share from 3Q15’s 40% in the near term as MBS continues to have the location advantage. 
  • However, we project a reprieve over the medium term as RWS refocuses its efforts from VIP to mass while the addition of 550 hotel rooms at Genting Hotel Jurong in 3Q15 could drive better grind mass visitation. 

■ Maintain Hold 

  • We maintain our Hold call on GENS in view of near-term pressure in GGR as RWS continues to lose market share to MBS in both the VIP and mass segments. 
  • Our DCF-based target price falls to S$0.73 after cutting FY15-17 EPS by 8-16% to account for lower gaming volumes. 
  • We would turn more positive with signs of stabilisation in: 
    1. bad debt expense, 
    2. rolling chip volume, and 
    3. mass market share 
    with the help of Genting Hotel Jurong and management realignment to focus on the mass gaming segment.

Jessalynn CHEN CIMB Securities | Kenneth NG CFA CIMB Securities | 2016-01-28
CIMB Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.73 Down 0.81