Genting Singapore - Maybank Kim Eng 2016-02-19: Cleaning up its VIP operations

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GENTING SINGAPORE PLC G13.SI 

Genting Singapore (GENS SP) - Cleaning up its VIP operations 

Needs consistent earnings to re-rate; Maintain HOLD 

• 4Q15 results were within our expectations. 
• While the final DPS of 1.5 cents was 50% higher than our estimate, the dividend yield remains lukewarm at 2.1%. 
• 4Q15 VIP volumes continue to ease, but to be fair, we note that the 4Q15 provision for doubtful debts was an intra-year low. 
• More importantly, the high margin mass market remains resilient. 
• GENS also disposed substantially all of its portfolio investments that generated exceptional losses in the past. 
• Maintain HOLD and SGD0.78 TP. 

Results within our expectations 

• GENS reported a 4Q15 net loss of SGD7.8m due to SGD70.2m in exceptional losses. That said, 4Q15 core net profit of SGD62.5m (+176% YoY, -10% QoQ) brought 2015 core net profit to SGD267.6m (-43% YoY), which was within our expectations at 92% of our full year estimate. 
• 2015 revenue of SGD2.4b (-16% YoY) was also within our expectations at 101% of our full year estimate. 
• The final DPS of 1.5 cents, though, was 50% higher than our estimate. 

Cleaner VIP operations and balance sheet 

• VIP volume share eased 2ppts QoQ to 38% as GENS extended less credit to VIPs. That said, 4Q15 provision for doubtful debts was 51% lower QoQ to SGD45.3m. 
• Furthermore, 4Q15 trade and other receivables of SGD894.9m were 26% lower YoY and flattish QoQ. 
• GENS also stated that it disposed substantially all of its portfolio investments that generated exceptional losses in the past. But we note that there is still SGD207.3m of AFS financial assets on its balance sheet as at end-2015. 

More stable earnings going forward? 

• The 4Q15 normalized VIP hold rate adjusted EBITDA was SGD237m or SGD948m on an annualized basis. 
• Our FY16 EBITDA estimate of SGD913m assumes a normalized VIP hold rate of 2.85% (4Q15: 2.1%, FY15: 2.4%), which is only 4% less, and GENS does not expect its VIP volume to fall much more, despite being cautious on extending credit to VIPs going forward. 
• We leave unchanged our estimates and SGD0.78 TP based on 8x FY16 EV/EBITDA or 2SD below its post-2009 12M EV/EBITDA mean.

Yin Shao Yang Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-02-19

Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 0.78 Same 0.78