Genting Singapore - OCBC Investment 2016-11-04: More than a lucky quarter

Genting Singapore - OCBC Investment 2016-11-04: More than a lucky quarter GENTING SINGAPORE PLC G13.SI

Genting Singapore - More than a lucky quarter

  • Adj. EBITDA margin at 40%.
  • Expect casino bill to be debated next week.
  • Maintain HOLD.

3Q results exceeds expectations on EBITDA margins.

  • Genting Singapore’s (GS) posted a strong set of 3Q16 results. Revenue growth was in line with expectations: 3Q16 revenue dropped 8.6% YoY to S$581.5m, on the back of a 9.8% drop in gaming revenue and a 22.8% jump in non-gaming revenue. 3Q and 9M revenue made up 27% and 78% of our FY16 forecast respectively.
  • Nonetheless, 3Q adj. EBITDA beat our expectations at S$233.6m, or 11.6% higher YoY, due to the decrease in bad debt provisions as well as the greater-than-expected cost-savings from GS’s right-sizing exercise in 2Q. The adj.
  • EBITDA margins came in at 40.2% for 3Q16, as compared to 24.1% in 2Q16 and 32.9% in 3Q15.
  • 3Q and 9M adj. EBITDA constituted 34% and 79% of our initial FY16 forecast respectively. On a normalized hold basis, 3Q adj. EBITDA revenue would have been ~8% lower at S$215m.

Forces seem aligned in Japan 

  • Management appears optimistic with regard to the Japanese Diet’s casino bill debate, which is expected to happen 9 Nov 2016. We note that GS may enjoy increased buying interest if the bill is passed. 
  • Going forward, we note the ongoing property enhancement at Maritime Experiential Museum that is scheduled to complete by end 2017 as well as the flow-through of cost-savings to future quarters. 
  • Meanwhile, the construction at Jeju has been stalled due to a typhoon and the damage to the construction works is currently being assessed. We expect most of the damages to be covered by insurance.

Fair value increases to S$0.81 

  • We adjust our COGS to reflect the greater cost savings and lower bad debt provision going forward. Following the fine-tuning, our DCF-based FV increases from S$0.77 to S$0.81.
  • Including Genting’s 1.5 S cent interim dividend, our blended FY16/FY17 dividend yield comes to 2.6%. 
  • Having scaled down its VIP segment and taken less credit risk, GS appears to be in better stead in this tough operating environment. 
  • We maintain HOLD with fair value of S$0.81.

Deborah Ong OCBC Investment | 2016-11-04
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.81 Up 0.770