Genting Singapore - OCBC Investment 2016-12-01: Japan’s casino bill to be voted on Dec 6

Genting Singapore - OCBC Investment 2016-12-01: Japan’s casino bill to be voted on Dec 6 GENTING SINGAPORE PLC G13.SI

Genting Singapore - Japan’s casino bill to be voted on Dec 6

  • According to a Japanese news source (casino-irjapan.com) and Bloomberg, after yesterday’s deliberation, the ruling party looks to pass in the bill in the lower house plenary session on Dec 6, after which it will go to the upper chamber.
  • Please note that this first casino promotion bill is meant to legalize casinos in Japan. If successful, a second casino implementation bill will be passed at the next parliamentary session at the earliest. Casino licenses will then be issued according to the timeline set in the second or subsequent bills. 
  • Given the relatively muted response of Genting Singapore’s (GS) price to the deliberations yesterday and well as a high degree of investor awareness of the LDP’s majority in parliament, the legalization of casinos in Japan may already be priced into the market.
  • From a fair value standpoint and to minimize the dependence of our assumptions on unpredictable political outcomes, we intend to wait for more certainty and clarity on Japan’s prospects before revisiting our target price. We find the details from yesterday’s deliberation insufficient to precipitate a fair value change. 
  • Risk-averse investors are encouraged to take profit at current prices; according to Bloomberg, GS is currently trading at a consensus blended forward EV/EBITDA of 11.7x which is a 37% premium to its 2 year average of 8.6x and a 17% premium to its 5 year average of 10.0x. 
  • We keep to our SELL rating and fair value of S$0.75.

Deborah Ong OCBC Investment | http://www.ocbcresearch.com/ 2016-12-01
OCBC Investment SGX Stock Analyst Report SELL Maintain SELL 0.750 Same 0.750