Genting Singapore - OCBC Investment 2018-08-06: Japan IR Implementation Bill Has Been Enacted

SGinvestors.io

GENTING SINGAPORE LIMITED SGX:G13

Genting Singapore - Japan IR Implementation Bill Has Been Enacted

• Despite growing VIP rolling volumes…
• Adj. EBITDA down 9% y-o-y.
• Just a temporary blip.

8% decline in gaming revenue

• Genting Singapore posted a weaker than expected set of quarterly results. 2Q18 revenue dropped 6% y-o-y to S$560.3m or 21% of our initial full-year forecast, mainly due to an 8% decline in gaming revenue while non-gaming revenue remained stable with a 1% y-o-y increase.
• Genting Singapore's 2Q net profit increased 3% y-o-y or S$4.9m to S$177.6m. This was mainly because the S$23.9m decline in gross profit and S$3.2m increase in administrative expenses was offset by a S$14.0m increase in other operating income and a S$15.1m reduction in other expenses.
• With the perpetual capital securities fully redeemed, 2Q18 PATMI increased 24% y-o-y to S$177.6m.

~ SGinvestors.io ~ Where SG investors share

Hold-normalized EBITDA would have been S$298m vs. reported S$265.9m

• Genting Singapore's 2Q18 adjusted EBITDA dropped 9% y-o-y to S$265.9m or 20% of our initial full-year forecast. EBITDA margins came in at 47.5%, which was lower than the 2Q17 margin of 49.1% and the 1Q18 margin of 53.2%. This was below our expectations.
• While VIP rolling volume was up y-o-y, the luck factor was unfavorable. 2Q adjusted EBITDA on a hold-normalized basis would have been S$298m or ~12% higher than the reported figure.
• For 1H18, adjusted EBITDA was up 8% y-o-y at S$624.8m and came up to 46% of our initial full-year forecast.

Growth story still intact

• We believe that the weaker EBITDA performance may weigh on the stock in the near-term but still expect VIP rolling volumes to continue to trend upwards while margins remain robust.
• On the other hand, we expect the non-gaming segment to remain stable with visitor arrivals into Singapore to remain healthy.

Japan IR Implementation Bill has been enacted!

• The Japan IR Implementation Bill was enacted by the Japanese Diet on 20 July and GS has been hiring a new team of Japanese nationals to prepare for the bid. We believe this represents an important opportunity for GS and will continue to monitor their progress.
• After making adjustments, our FCFE-based fair value drops slightly from S$1.45 to S$1.39. We maintain BUY on the stock.

Carmen Lee OCBC Investment Research | https://www.iocbc.com/ 2018-08-06

SGX Stock Analyst Report BUY Maintain BUY 1.39 Down 1.45