Genting Singapore - RHB Invest 2017-08-03: Cheers To VIP

Genting Singapore - RHB Invest 2017-08-03: Cheers To VIP GENTING SINGAPORE PLC G13.SI

Genting Singapore - Cheers To VIP

  • Genting Singapore's 2Q17 results sprang positive surprise as its average VIP holds registered 3% (vs theoretical level of 2.75%), while bad debt provision stayed healthy at SGD14.7m. 
  • The group is looking to fully redeem its outstanding perpetuals of SGD2.3bn by Oct 2017 by making use of its existing cash pile of SGD5.7bn. 
  • Management reaffirms its intention to expand its presence into Japan by potentially putting in bids in more than one city. 
  • Maintain NEUTRAL, with our DCF-based TP revised to SGD1.19 (from SGD1.04, 1% downside), following our earnings forecast changes.

2Q17 results review. 

  • Genting Singapore's 1H17 core earnings of SGD352.8m came above both our/consensus expectations at 65.5%/67.6% of FY estimates respectively. This was driven by outperformance in 2Q17, with core earnings at SGD182.1m, due to better-than-expected VIP luck factor (overall holds closed at 3% vs theoretical level of 2.75%). 
  • Bad debt provision stayed healthy at SGD14.7m (from SGD53.6m/15m in 2Q16/1Q17). A first interim DPS of SGD0.015 was declared. 
  • We deem this in line with our 2017F DPS of SGD0.03.

Redemption of perpetuals. 

  • Management reiterated its intention to fully redeem its outstanding perpetuals of SGD2.3bn by Oct 2017. This would be financed by its existing cash pile of SGD5.7bn. 
  • We believe Genting Singapore would re-enter the debt market, should its venture into the Japanese gaming market materialise.

To reinvest in RWS. 

  • The group is currently in discussion with the Government to finalise a 5-year strategic roadmap charting its reinvestment into RWS. We believe this could help to rejuvenate visitation interests to the seven-year-old integrated resort in the long run. 
  • Management is looking to share more financial details upon conclusion of the negotiation by end-2017. 
  • We are currently allocating for annual capex of MYR200-250m for 2017-2019.

All out on Japan. 

  • Management expects official bidding for Japan’s integrated resorts to take place by mid-2018. It is hoping for official legalisation of the gaming bill by 4Q17. The group reaffirmed its openness towards forming joint ventures with local institutions to enhance its chances of winning. 
  • Management is exploring the possibility of participating in more than one bid to enhance its chances. Some of the potential cities include Osaka, Yokohama, and Hokkaido.

Forecasts and risks. 

  • We upgrade our FY17F-19F EPS by 13-15% as we expect its VIP segment to gather pace – with management indicating that the group is likely to be more aggressive on credit offerings for the rest of the year.
  • We believe this is intended to capitalise on the current bullish sentiment, as observed in Macau gaming volume, which witnessed the biggest YoY jump in almost three years with 29% growth in July. 
  • Key risks include the volatility in win rates and potential weakness in tourist arrivals to Singapore due to the strengthening of the SGD against regional currencies.

Maintain NEUTRAL

  • Maintain NEUTRAL with our DCF-derived TP revised to SGD1.19 (from SGD1.04) following our earnings revision and to capture its latest net cash position. 
  • While we are glad to see continued improvements under its overall gaming performance, we believe the current valuation is fair and we caution that the current political uncertainty in Japan could impede sentiment.

Singapore Research Team RHB Invest | 2017-08-03
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 1.19 Up 1.040