Genting Singapore - Maybank Kim Eng 2019-02-22: Could Have Been Better But All Eyes On RWS 2.0 & Japan

GENTING SINGAPORE LIMITED (SGX:G13)

Genting Singapore - Could Have Been Better But All Eyes On RWS 2.0 & Japan

GENTING SINGAPORE LIMITED (SGX:G13)'s FY18 core net profit was at the lower end of our expectations only due to higher-than-expected depreciation & amortisation (D&A). Thus, we trim our forward earnings estimates by 8% p.a. but our EBITDA estimates and EV/EBITDA based Target Price of SGD1.26, on 9.0x FY19E EV/EBITDA (close to - 1SD to LT mean of 8.5x) are unchanged.
Investors ought to BUY Genting Singapore to ride on its RWS renovation/expansion plan that will be released in 1H19 and potential expansion into Japan, where bidding will begin in 2H19.

Genting Singapore's 4Q18 core net profit of SGD152.3m (+3% y-o-y, -28% q-o-q) brought FY18 core net profit to SGD765.5m (+19% y-o-y), which was at the lower end of our expectations at 96% of our full year estimate. Yet, FY18 EBITDA of SGD1.23b (+7% y-o-y) was within our expectations at 102% of our full year estimate.
The former’s shortfall was due to higher-than-expected 4Q18 D&A of SGD104.3m (+40% y-o-y, +45% q-o-q) as Genting Singapore cut the useful life of some of its assets as it prepares to renovate and expand RWS.

Final DPS of 2.0 cents (+0% y-o-y) brought FY18 DPS to 3.5 cents (+0% y-o-y), which was within our expectations at 100% of our full year estimate.
Note that Genting Singapore's 4Q18 earnings was suppressed by a rather high trade receivables (TR) impairment of SGD35.6m but FY18 TR impairment of SGD58.1m was within our expectations and Genting Singapore expects annual TR impairment to hover at this level going forward. End-FY18 TR balance of only SGD143.8m also limits the scope for further impairments.

Genting Singapore is cautious on the global economy. That said, it will still gradually loosen credit extension to VIPs. This jives with our modest FY19 RWS VIP volume growth forecast of +5% y-o-y (FY18: +23% y-o-y) and FY19 RWS mass market GGR growth forecast of +5% y-o-y (FY18: +2% y-o-y).
Our EBITDA estimates are unchanged but we trim our core net profit estimates by 8% p.a. only due to higher D&A forecast of ~SGD360m (+27%) p.a..
Our newly introduced FY21E earnings estimate implies modest growth of +7% y-o-y. As our EBITDA estimates are unchanged, our EV/EBITDA Target Price remains.

4Q18 EBITDA grew 12% y-o-y due to:-
- 4Q18 VIP volume growth of ~10% y-o-y;
- 4Q18 VIP win rate of 3.4% which was ~70bps higher y-o-y; But moderated by:-
- 4Q18 impairment of trade receivables of SGD35.6m (4Q17: SGD4.7m)
4Q18 EBITDA eased 10% q-o-q due to:-
- 4Q18 impairment of trade receivables of SGD35.6m (3Q18: SGD12.9m)
But moderated by:-
- 4Q18 VIP win rate of 3.4% which was ~50bps higher q-o-q.

Yin Shao Yang Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-02-22

SGX Stock Analyst Report BUY MAINTAIN BUY 1.260 SAME 1.260