Genting Singapore (GENS SP) - Maybank Kim Eng 2018-02-26: Could Have Been Better But Maintain Our Positive View

Genting Singapore (GENS SP) - Maybank Kim Eng 2018-02-26: Could Have Been Better But Maintain Our Positive View GENTING SINGAPORE PLC G13.SI

Genting Singapore (GENS SP) - Could Have Been Better But Maintain Our Positive View

Maintain BUY and SGD1.46 Target Price 

  • Despite an ‘unlucky’ 4Q17, Genting Singapore (GENS)'s FY17 results were still within our expectations. 
  • Our FY18/FY19 EBITDA estimates are slightly trimmed by 2%/3% after model adjustments and we introduce FY20 EBITDA estimate of SGD1.3b (+4% y-o-y). Our DPS estimates are raised 17% to 3.0 cents.
  • Resorts World Sentosa (RWS) regained market share, while trade receivables hit another record low in 4Q17. 
  • Genting Singapore’s outlook remains bright, in our view. SGD1.46 Target Price based on an unchanged 12x FY18 EV/EBITDA (post-Jun 2009 12M forward EV/EBITDA mean).

Earnings in-line but dividends positively surprised a tad 

  • 4Q17 core net profit of SGD148.6m (+43% y-o-y, -21% q-o-q) brought FY17 core net profit to SGD648.1m (+127% y-o-y), which was within our expectation at 94% of our full year estimate. 
  • FY17 EBITDA of SGD1.2b (+48% y-o-y) was also within our expectation at 97% of our full year estimate. That said, final DPS of 2.0 cents brought FY17 DPS to 3.5 cents which was 17% above our expectation. 
  • 4Q17 core net profit fell 21% q-o-q but this was due to a VIP hold rate of 2.7% which was ~40bps lower q-o-q.

More positive than negative observations 

  • Resort World Sentosa (RWS) share of VIP volume gained 4ppts q-o-q to 41% in 4Q17, while RWS share of mass market GGR gained 1ppt q-o-q to 40% in 4Q17.
  • We gather that the recovering MYR translated into market share gains for RWS. Trade receivables and impairments both hit record lows again. That said, direct VIP rebate rates inched up ~25bps q-o-q to 1.7% in 4Q17. 
  • GENS stated that it hosted more high-end VIPs whose rebate rates start off at higher levels than low-end VIPs.

Earnings outlook still positive 

  • Despite a brief respite in industry VIP volume growth in 4Q17, we continue to expect the VIP market recovery in Macau to ‘spill over’ to Singapore. Thanks to its record low trade receivables, Resort World Sentosa (RWS) can generate more VIP volume by extending more credit to VIPs. 
  • We also note positively that the high margin industry mass market GGR resumed growing y-o-y in 4Q17, which we gather is due to recovering consumer sentiment in Singapore.

Results analysis 

  • 4Q17 EBITDA grew 9% y-o-y, although 4Q17 VIP hold rate of 2.7% was ~10bps lower y-o-y as: 
    • 4Q17 VIP volume of ~SGD7.5b was ~10% higher y-o-y; 
    • 4Q17 trade receivables impairment of SGD4.7m was down 88% y-o-y; 
    • 4Q17 mass market GGR of ~SGD375m was ~10% higher y-o-y.
    • 4Q17 EBITDA fell 20% q-o-q largely because 4Q17 VIP hold rate of 2.7% was ~40bps lower q-o-q.

Other updates 

  • GENS is optimistic that the Japanese Integrated Resort Implementation Bill will be tabled in this year’s Diet session.
  • This will pave the way for the formal bidding process for a Japanese integrated resort licence in FY19.

Yin Shao Yang Maybank Kim Eng | 2018-02-26
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 1.460 Same 1.460