Genting Singapore - CGS-CIMB 2018-05-10: 1Q18 Clawing Market Share To A Strong Quarter

Genting Singapore - CGS-CIMB 2018-05-10: 1q18 Clawing Market Share To A Strong Quarter GENTING SINGAPORE PLC SGX: G13

Genting Singapore (GENS) - 1Q18 Clawing Market Share To A Strong Quarter

  • Genting Singapore (GENS)'s 1Q18 adjusted EBITDA of S$358.9m was strong at c.30% of our/consensus forecasts of S$1.18bn/S$1.19bn; and above our 1Q18 forecast of S$297.6m.
  • Better gaming GGR and VIP luck rate were one of the key drivers. We estimate GENS clawed higher VIP and mass market shares of 49% and 42.6% respectively.
  • 1Q18 adj. EBITDA margin rose to 53.2% (since 4Q11’s margin of 51.9%).
  • Whilst 1Q18 was a strong showing, we maintain our forecasts for now given that 2Q is a seasonally weaker quarter; and luck factor could normalise.
  • We maintain ADD with a Target Price of S$1.40 based on 11.5x FY19F EV/EBITDA (close to +0.5 s.d. of its 5-year historical mean).

IP up on volume growth and better luck factor

  • Genting Singapore (GENS)’s 1Q18 VIP gross gaming revenue (GGR) was estimated to have grown to S$297m (+45.7% q-o-q/ +47.6% y-o-y) on a higher win rate of 3.2% (vs. 4Q17/1Q17:2.7%/3.0%) and higher estimated rolling-chip volume (c.+22% q-o-q/+36.1% y-o-y). 
  • VIP market share was 49% (vs. our estimated FY18F market share of 40% and average FY17 of 37.1%) due to GENS embarking on more attractive VIP credits given since 4Q17, in our view.

Mass shows growth

  • Genting Singapore (GENS)’s 1Q18 mass GGR was estimated to have grown to S$400.4m (+9.6% q-o-q/ +4.7% y-o-y) on an estimated market share of c.41% ahead of 4Q17/1Q17’s 39.5%/38.7% and our estimated FY18F market share of 40%. 
  • GENS’s mass market share seems to have high correlation of 0.9x with the RM/S$, and we believe the slight appreciation in 1Q18 could have had an impact on market share.

Lower trade receivables; higher EBITDA margins

  • Genting Singapore (GENS)’s 1Q18 trade receivables impairment fell c.40% to S$9.1m (vs.1Q17: S$15.0m); close to our S$9.5m/quarter FY18F estimates. 
  • 1Q18 adjusted EBITDA margin of 53.2% was high and back to levels seen in 2011.

Japan purportedly getting closer

  • Management was positive on the Japan Gaming Bill and mentioned there is a chance that the ‘Responsible Gambling Bill’ and ‘Implementation Bill’ could be sanctioned in FY18; and bidding for prospective casinos to emerge in FY19F. 
  • Genting Singapore (GENS) issued a JPY20bn (S$240m) yen-denominated bond in FY17.

Maintain ADD

  • We maintain our forecasts and ADD call for now as 2Q18 is typically a seasonally-weaker quarter and luck factor could normalise. 
  • Overall, we are still positive on the stock as at 8.6x CY19F EV/EBITDA, it is undervalued vs. its historical multiple and peers (discount versus Macau peers). 
  • Target Price of S$1.40 is based on an unchanged 11.5x FY19F EV/EBITDA (0.5 s.d. above the average mean).

Catalysts and risks

  • Potential re-rating catalysts include
    1. potential for higher DPS, and
    2. a Japan win, which we have not incorporated. 
  • Risks are lower adjusted EBITDA and market share.

Cezzane SEE CGS-CIMB | LIM Siew Khee CGS-CIMB | 2018-05-10
SGX Stock Analyst Report ADD Maintain ADD 1.400 Same 1.400