Genting Singapore - OCBC Investment 2017-05-15: Strong Start To The Year

Genting Singapore - OCBC Investment 2017-05-15: Strong Start To The Year GENTING SINGAPORE PLC G13.SI

Genting Singapore - Strong Start To The Year

  • Strong earnings this quarter.
  • Reaping the rewards of improving margins.
  • Re-iterate BUY.

Adjusted EBITDA up 47% YoY and 21% QoQ 

  • Genting Singapore (GS) posted a solid set of results this quarter. 1Q17 net profit attributable to ordinary shareholders jumped to S$181.1m from S$10.8m profit in 1Q16. This was on the back of steady 1Q17 revenues at S$585.6m and a significant improvement in its margins with gross profit increasing 52% YoY to S$260.9m.
  • Administrative expenses and Selling & Distribution expenses dropped 5% YoY to S$40.5m and 7% YoY to S$12.7m, respectively. Finance costs also dropped 34% YoY to S$9.2m.
  • Adjusted EBITDA in 1Q17 jumped 47% YoY to S$283.2m, which was within our expectations.
  • On a QoQ basis, total revenue grew 5% to S$586.6m on the back of a 9% increase in gaming revenue to S$434.4m, which was in turn the result of a strong performance from VIP gaming as well as premium mass business.
  • Adjusted EBITDA increased 21% QoQ. GS’s non-gaming segment continues to show healthy performance with the hotel clocking an occupancy rate of over 92%, which is above the industry’s occupancy, and with the attractions at RWS welcoming 1.5m visitors.

Look forward to continued improvement in operating margins; Re-iterate BUY 

  • As we noted in our previous report on 23 Feb , GS’s operating margins continue to benefit from the group’s cost efficiency initiatives, a measured credit policy, and a focus on better margin business. As of 3 Jan, the group disposed its 50% interest in the Jeju integrated resort, for proceeds of S$596.3m which resulted in a gain on disposal of S$96.3m this quarter. 
  • We believe the divestment offers GS further opportunities to recycle its capital. Furthermore, despite the challenging hospitality sector in Singapore, GS’s RWS has showed a healthy operating performance this quarter. 
  • Going forward, as RWS broadens the appeal of its offerings to the premium mass market, it has lined up mega food festivals including “The Great Food Festival” as well as other cultural events. 
  • Looking ahead, we expect GS to continue to benefit from higher operating margins as well as steady revenues from both its gaming and non-gaming segments.
  • We re-iterate BUY on GS with a fair value of S$1.17.

Eli Lee OCBC Investment | 2017-05-15
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 1.170 Same 1.170