Genting Singapore

Kim Eng on 7 May 2012

In search of sequential recovery in VIP volume. Genting Singapore (GENS) will release its 1Q12 results on 10 May. We are encouraged by competitor Marina Bay Sands’ 1Q12 VIP volume recovery QoQ and are optimistic that it will spill over to Resorts World Sentosa. We expect GENS to report 1Q12 EBITDA of SGD350m. Maintain Buy call and SGD2.00 DCF-based TP. Potential M&As after raising SGD2.3b in perpetual securities will serve as another re-rating catalyst.

Marina Bay Sands 1Q12 results encouraging. Las Vegas Sands released its 1Q12 results on 26 Apr, which also included Marina Bay Sands' (MBS) figures. Encouragingly, MBS' 1Q12 VIP volume recovered by 17% QoQ to SGD16.2b (Figure 1), despite 1Q12 VIP win rate of 3.58% that was 24 bps higher QoQ. Ceteris paribus, higher VIP win rates tends to reduce length of play and in turn, VIP volume.

Hope floats for RWS’ 1Q12 VIP volume. Assuming that Resorts World Sentosa (RWS) still commands the 46% share of VIP volume from 4Q11, its 1Q12 VIP volume would have recovered to SGD13.9b. That said, RWS’ share of VIP volume would have likely risen QoQ due to the opening of the 194-room Equarius Hotel and Beach Villas on 16 Feb, which nearly tripled its VIP room inventory.

1Q12 EBITDA of SGD350m? 1Q12 VIP volume of SGD13.9b will still be 25% lower YoY as RWS held a 59% share of the VIP volume in 1Q11. Assuming a theoretical VIP win rate of 2.85%, GENS should report 1Q12 EBITDA of SGD350m that would be 35% lower YoY because of potentially lower VIP volume YoY and lower VIP win rate YoY (1Q11: 3.8%). 1Q12 EBITDA of SGD350m would still be 14% lower QoQ despite potentially higher VIP volume QoQ due to lower VIP win rate QoQ (4Q11: 3.9%).

Maintain Buy call and SGD2.00 TP. We leave our earnings estimates unchanged. We are encouraged by MBS’ 1Q12 VIP volume recovery and are optimistic that it will spill over to RWS. We still like GENS: (i) improved macro-economy translates into recovering VIP volume; (ii) the near-tripling of its VIP capacity with Equarius Hotel and Beach Villas; (iii) potentially more junket approvals next year; and (iv) possible M&As