Genting Singapore - RHB Investment 2016-02-19: Better Year Ahead

Genting Singapore - RHB Investment 2016-02-19: Better Year Ahead GENTING SINGAPORE PLC G13.SI 

Genting Singapore - Better Year Ahead 

  • We continue to believe that the worst is likely over for Genting Singapore as management’s stringent credit control is gradually bearing fruit, as evident in the improvement in its bad debt provisions. 
  • Reiterate our TRADING BUY call with our TP unchanged at SGD1.00. 
  • The group is currently trading at an EV/EBITDA of < 4x, which implies an appealing discount of 60%/70% over its historical mean/Macau gaming peers. 

Lower impairments to boost bottomline. 

  • We expect to see improvements in the quality of its books this year, owing to the group’s more selective credit offerings and the tightening of its collection procedures over the past 6-12 months. 
  • We are forecasting for its bad debt provisions to improve to SGD180mSGD230m pa going forward (from SGD270.7m in 2015). 
  • While the operating environment remains challenging given Singapore’s subpar tourists arrivals and regional competitive pressure, we think this well-executed approach will help to boost its bottomline for FY16F-17F. 
  • Besides, we also find positives in management’s move to reduce its holdings of derivatives and financial instruments in addressing market concerns over the volatile nature. 
  • Notably, its available-for-sale financial current assets and the derivative financial instruments under its current liabilities both reduced to zero as of Dec 2015 (from SGD1.31bn and SGD246.9m in Dec 2014 respectively). 

Updates on Korea. 

  • On its Resorts World Jeju, soil works are nearing completion with construction works to commence by end-February. 
  • Management has set aside SGD350m capex for 2016. 
  • We expect the soft opening of the casino to take place earliest by end-2017. 

Risks. 

  • Key risks include the volatility in VIP win rates, potential weakness in tourist arrivals to Singapore, as well as rising regional competitive pressure. 

Maintain TRADING BUY. 

  • While we acknowledge that the operating environment remains challenging, we continue to believe the worst is likely over for Genting Singapore. 
  • We make no major changes to our forecasts. Maintain TRADING BUY, with our SOP-based TP unchanged at SGD1.00. This is supported by our DCF corroborative valuation (WACC: 7.7%, terminal growth: 1.0%) , which derives a TP of SGD0.99.



Singapore Research Team RHB Invest | http://www.rhbinvest.com.sg/ 2016-02-19
RHB Invest SGX Stock Analyst Report TRADING BUY MAINTAIN TRADING BUY 1.00 Same 1.00


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