Genting Singapore - OCBC Investment 2016-05-16: Upgrade To HOLD with S$0.72 FV

Genting Singapore - OCBC Investment 2016-05-16: Upgrade To HOLD with S$0.72 FV GENTING SINGAPORE PLC G13.SI 

Genting Singapore - UPGRADE TO HOLD WITH S$0.72 FV

  • 1Q core met 41% of FY estimate
  • Focus on mass premium paying off
  • Upgrade to HOLD with new S$0.72 FV

Decent start to FY16

  • Genting Singapore (GS) made a better-than-expected start to FY16. Although 1Q16 revenue slipped 5% to S$608.0m, it met about 30% of our FY16 forecast. 
  • While reported net profit (after perpetuals) tumbled 83% to S$10.8m, we note that core earnings (after perpetuals) fell just 11% to S$54.4m, or 41% of our FY16 estimate.

Lady Luck was kinder

  • According to management, RWS (Resorts World Sentosa) recorded a 11% QoQ increase in Adjusted EBITDA of S$201.2m, boosted by growth in the regional gaming volume for VIP and premium mass, as well as improved VIP rolling win percentage (3.9% versus 1.4% for MBS). 
  • Its non-gaming business also did well, with 1.6m visitor-ships to its attractions, while USS recorded its best 1Q performance since opening, both in terms of revenue and attendance.

Will focus on premium mass market

  • Going forward, GS will continue to focus on the premium mass segment, where it has already seen encouraging progress with the implementation of new marketing strategies to grow the foreign premium mass market; it also expects the mass gaming market to do well after the strong electronics gaming machines performance in 1Q16. 
  • As for its VIP business, GS will continue to exercise caution; besides being prudent in granting credit, GS has also reduced the credit period from 90 to 30 days.

Jeju is progressing well

  • Separately, GS updated that the construction of the IR in Jeju, South Korea, is progressing well. And with construction of the residential plot now at an advanced stage, it has commenced sale of some units in Apr 2016 (targets to sell just under S$1b), and the whole resort is on track for a soft opening in 4Q17. 
  • On the back of the better-than- expected 1Q16 results, we raise our FY16 earnings forecast by 23%; our DCF-based FV also improves from S$0.60 to S$0.72 as we tweak our cashflow assumptions to account for lower development cost for Jeju. 
  • Upgrade to HOLD.

Carey Wong CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-05-16
OCBC Securities SGX Stock Analyst Report HOLD Upgrade SELL 0.72 Up 0.60