Genting Singapore - CGS-CIMB Research 2019-02-21: 4Q18 Results Review ~ Game On!


Genting Singapore - 4Q18 Results Review: Game On!

  • Genting Singapore's FY18 adjusted EBITDA of S$1.22bn was in-line at 101.6%/98.6% of our/consensus FY18 estimates (S$1.21bn/S$1.24bn). 
  • Final DPS of 2.0 Scts brought FY18 DPS to 3.5 Scts.
  • VIP GGR grew 20.8%; mass held steady. Genting Singapore's expects to keep volumes intact. 
  • Maintain ADD with an unchanged Target Price of S$1.28, now based on 9x EV/EBITDA (close to its 5-year historical mean of 9.3x) as we roll forward to CY20F. 

Adjusted EBITDA up 6.8% y-o-y

  • GENTING SINGAPORE LIMITED (SGX:G13)'s 4Q18 adjusted EBITDA of S$286m was 11.5% above 4Q17’s S$256.6m and took FY18 adjusted EBITDA up 6.8% y-o-y to S$1.23bn (vs. S$1.15m in FY17).
  • Higher gaming revenues (+5.7% y-o-y to S$1.7bn vs. FY17: S$1.59bn) were the main driver, coupled with COGS which were relatively steady despite trade receivable impairments growing 20% to S$58.1m vs. FY17’s S$48.3m (Genting Singapore decided to be more prudent in 4Q18 given the uncertainties in the global market).
  • All in, FY18 adjusted EBITDA margin held steady at 48.4% vs. FY17’s 48.1%.

VIP driven by higher market share; mass market stays steady

  • We estimate FY18 VIP volumes grew 20.8% to S$34bn and with a better win rate of 3.03% in FY18 (vs. 2.93% in FY17), VIP gross gaming revenue (GGR) rose by 24.9% to S$1.0bn (vs. FY17 of S$827m).
  • We estimate Genting Singapore took 48.1% of the VIP market, a big jump from the 37.2% seen in FY17. We estimate mass market GGR grew by 1.2% y-o-y, with Genting Singapore holding its ground at c.39% of the market.

Staying steady in FY19

  • For the VIP segment, it remains highly cognisant of global uncertainties but is still selectively keeping its credit lines open with the aim to maintain volumes.
  • For the mass segment, it guides that regional competition is still steep, but is positive on additional room capacity at new hotels operated by Far East Hospitality (slated to open throughout FY19F) which could result in more footfall in Sentosa, and in turn provide a catalyst for RWS.

Redevelopment of RWS and Japan

  • Genting Singapore hopes to provide guidance on redevelopment plans for Resorts World Sentosa (RWS) in 1H19F.
  • Meanwhile, news on Japan could emerge in 2H19F; it estimates the Request for Concept could emerge by May and Request for Proposal by Aug/Sep 19.

Maintain ADD

  • We raise our FY19-20F EPS by 6.4-8.8% and introduce FY21F EPS. Refer to the PDF report attached for details of forecast revisions.
  • We maintain our ADD call with an unchanged Target Price of S$1.28 as we roll forward to CY20F, now based on 9x EV/EBITDA (close to its 2014-2018 average mean of 9.3x).
  • Potential re-rating catalysts are higher gaming revenues and margins.
  • Downside risks are lower gaming revenues, higher trade receivable provisions and failure to secure any Japan opportunities.

Cezzane SEE CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | 2019-02-21
SGX Stock Analyst Report ADD MAINTAIN ADD 1.280 SAME 1.280