Genting Singapore - CIMB Research 2017-10-26: Sustained VIP Chip Growth At MBS Positive For GENS

GENTING SINGAPORE PLC G13.SI

Genting Singapore - Sustained VIP Chip Growth At MBS Positive For GENS

Marina Bay Sands (MBS)’s 3Q17 adjusted EBITDA of US$442m (+13% yoy) was lifted by a higher rolling win rate and VIP volumes, which maintained the yoy growth trend seen in 2Q17.
Overall sustained return in VIP volumes to Singapore is positive for the industry and Genting Singapore (GENS).
We expect GENS to report 3Q17 adjusted EBITDA of S$285.1m in the upcoming 3Q17 results release scheduled for 6 Nov. Maintain Add and target price of S$1.35.

MBS reported an adjusted-property EBITDA of US$442m (-10% qoq/+13% yoy), rolling chip volume of US$9.4bn (+8% qoq/+30% yoy), non-rolling chip volume of US$943m (+4% qoq/-4% yoy) and slot handle takings of US$3.7bn (+6% qoq/+7% qoq). These figures will be higher in S$ terms.
3Q17 VIP GGR rose 32% yoy to US$311m (3Q16: US$236m), lifted by a higher rolling-chip win rate of 3.29% (vs. 3Q16’s 3.25%), albeit lower than 2Q17’s 4.42%.
Noteworthy were rolling chip volumes that maintained the yoy growth trend seen in 2Q17 following sequential yoy declines in 1Q16-1Q17. MBS reiterated its strong commitment to cost controls, which helped to enhance profitability and margins.
Mass GGR of US$421m dipped slightly on a yoy basis (vs. 3Q16: US$439m) on a lower yoy non-rolling chip drop and win percentage.

Genting Singapore (GENS) is scheduled to announce its 3Q17 results after working hours on 6 Nov.
We estimate 3Q17 adjusted EBITDA was S$285.1m on the back of yoy uplift in VIP and mass GGR and GENS’s strong cost control efforts.
MBS’s sustained VIP rolling chip yoy growth implies that the return in VIP volumes to Singapore was sustained, supporting our VIP volume growth thesis for GENS.
A key focus during the GENS results release will be its ability to maintain market share, especially in the mass market space; and its efforts to keep the low VIP discounts and rebates that led to improved GGR in 2Q17.
Further updates on the timeline for Japan casinos is also expected given Japan held its snap election on 22 Oct. GENS recently announced the issuance of a JPY20bn (S$240m) yen-denominated bond, which speaks to its Japan investment dreams.

We maintain our Add rating and target price, based on 12x FY18F EV/EBITDA (slightly above its 6-year mean of 11.3x).
Potential re-rating catalysts are higher-than-expected margins and better gaming revenues.
Downside risks are a fall in gaming revenues, higher trade receivable provisions and failure to secure any Japan opportunities.

Cezzane SEE CIMB Research | LIM Siew Khee CIMB Research | http://research.itradecimb.com/ 2017-10-26

CIMB Research SGX Stock Analyst Report ADD Maintain ADD 1.350 Same 1.350