Genting Singapore - CGS-CIMB Research 2018-11-08: 3Q18 Unduly Pricing In Crisis Levels


Genting Singapore - 3Q18: Unduly Pricing In Crisis Levels

  • Genting Singapore's 3Q18/9M18 adjusted EBITDA of S$318.8m/S$943.6m was in line at 78%/76% of our/consensus (S$1.21bn/S$1.24bn) FY18F.
  • At 5.9x forward EV/EBITDA, the market is likening GENS’s prospects to the “down years” of FY15- 16, but we do not believe it is that dire.
  • We trim our FY19- 20F estimates and Target Price to S$1.28 (now based on 10x FY19F EV/EBITDA (vs. 11.5x), its 5- year historical mean). Retain ADD.

Adj. EBITDA up on sustained GGR growth and better non-gaming

  • Genting Singapore's 9M18 adj. EBITDA rose 5.3% y-o-y to S$943.6m (vs. 9M17: S$895.9m) as 9M18 gaming revenues (+2.3% y-o-y) were augmented by a 6.6% y-o-y jump in 9M18 non-gaming revenue.
  • Low trade receivables impairment (9M18: S$22.5m vs. 9M17: S$43.6m) also contributed to the improvement in 9M18 adj. EBITDA margin (50.3% vs. 9M17: 49.4%).
  • 9-Month core EPS was 83.7% of our full-year forecast.

VIP up on higher market share; mass holding steady

  • Estimated 3Q18/9M18 VIP GGR grew 5.7%/20.6% y-o-y on higher VIP market share of 46.8%/48.5% (vs. 3Q17/9M17: 37%/35.6%), despite 3Q18/9M18 win rates being lower at 2.9%/2.92% (vs. 3Q17/9M17: 3.1%/3.02%).
  • In the mass segment, GENS kept pace with the industry, clocking in 3Q18/9M18 market share of 38.8%/39.4% (vs. 39.0%/39.3% in 3Q17/9M17).


  • GENS guides that it is still in a comfortable position to extend credit to attract VIP customers; although it remains highly cognisant of the near-term risks that the US/China trade war could pose on VIP flows. It deems its receivables position as very manageable.
  • GENS recognises that regional competition in the mass segment is stiff; hence, it aims to continually upgrade its facilities. For Japan, the bidding process is estimated to start in 2H19F.

Market unduly pricing in watershed valuations

  • At 5.8x FY19F EV/EBITDA, the market is pegging GENS to trough valuations of end-FY15 to FY16, in our view. During that period, adjusted EBITDA was below S$900m, trade receivable impairments were above S$230m-260m p.a., and receivables balance was above S$200m.
  • 9M18 adj. EBITDA, trade receivable impairments and end- Sep 18 trade receivable balances are on relatively firmer footing.

Maintain ADD; lower Target Price just to be cautious on global uncertainties

  • We trim our FY19-20F adj. EBITDA forecasts as we opt to be cautious on forward earnings growth, and lower our FY19F EV/EBITDA Target Price basis to 10x, its average 5-year mean (vs. 11.5x previously) in light of global volatility.
  • But with share price upside of 43.6%, we see the stock as a value buy and maintain our ADD call.
  • Catalysts are higher-than-expected earnings growth; risks are vice versa.

Cezzane SEE CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://research.itradecimb.com/ 2018-11-08
SGX Stock Analyst Report ADD MAINTAIN ADD 1.28 SAME 1.440