Genting Singapore - RHB Invest 2016-11-04: 1H17 Outlook Remains Challenging....

Genting Singapore - RHB Invest 2016-11-04: 1H17 Outlook Remains Challenging.... GENTING SINGAPORE PLC G13.SI

Genting Singapore - 1H17 Outlook Remains Challenging....

  • ... as the group reiterated its selective credit offerings to improve the quality of its receivables going forward. 
  • An above-average 3.3% VIP hold rate coupled with stabilised bad debt provision of SGD50.2m helped to boost its 3Q16 showing. 
  • Maintain NEUTRAL, with an unchanged TP of SGD0.82.

Stabilising books. 

  • 3Q16 impairments on receivables registered SGD50.2m, largely matching its 2Q16’s SGD53.6m. 
  • Management hinted for room for further improvement as we move into 2017 owing to its stringent credit control as well as improved collection processes over the past 12-18 months. 
  • On the downside, however, this will likely limit its VIP growth over the near to medium term. 
  • Evidently, its VIP rolling volume declined by mid-teens sequentially.

Dividend surprise. 

  • To our surprise, management declared an interim DPS of 1.5 cents and highlighted the possibility of a final dividend come 4Q16 results.
  • We believe the move is intended to reward its existing shareholders as its Singapore operations are gradually maturing. We now expect the group to pay annual DPS of 2.5-3.0 cents for FY16-18F.

Updates on South Korea. 

  • On its proposed Resorts World Jeju development, management would formally file for the application for casino license in 1Q17. We believe the official opening of the casino will take place in mid-2018.

Turning positive on Japan. 

  • On a side note, management is turning more bullish on potential legalisation of integrated resorts in Japan following the landslide election win for Prime Minister Shinzo Abe’s ruling Liberal Democratic Party in July. We gather that the gaming bill will likely be debated in the current diet session ending 30 Nov.

Forecasts and risks. 

  • With the results coming in line, we make no major changes to our earnings forecasts. 
  • Key risks include the volatility in VIP win rates and potential weakness in tourist arrivals to Singapore due to the strengthening of the SGD against regional currencies.

Maintain NEUTRAL with our DCF-derived TP unchanged at SGD0.82. 

  • All in, while we expect to see further improvements in its bad debt provision over the medium term, the dearth of re-rating catalysts on both the VIP and mass market volumes prompt us to reiterate our cautious stance going forward.

Singapore Research Team RHB Invest | http://www.rhbinvest.com.sg/ 2016-11-04
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 0.820 Same 0.820