Genting Singapore (GS) saw lower revenue and earnings in 3Q12, affected by lower casino business and also start-up costs for its new West Zone attractions. 9M12 revenue fell 11% to S$2159.4m, or 62% of our full-year forecast, while reported net profit fell 32% to S$515.5m; estimated core earnings slipped to S$598.6m, meeting 62% of FY12 forecast. To account for continued near-term pressure on margins, we are scaling back our forecasts. We also scale back our DCF-based fair value from S$1.66 to S$1.33. Downgrade to HOLD and would be buyers closer to S$1.15.
Lower 3Q12 showing
Genting Singapore (GS) posted 3Q12 revenue of S$670.2m, down 16% YoY and 5% QoQ, where overall revenue was again affected marginally by lower gaming business volume, which also led to lower adjusted EBITDA of S$303.2m, down 19% YoY and 2% QoQ. Reported net profit fell 33% YoY and 16% QoQ to S$140.1m, while estimate core earnings (excluding forex and exceptional items) fell 41% YoY and 16% to S$158.9m. 9M12 revenue fell 11% to S$2159.4m, or 62% of our full-year forecast, while reported net profit fell 32% to S$515.5m; estimated core earnings slipped to S$598.6m, meeting 62% of FY12 forecast.
Adjusted EBITDA margin stays above 45%
3Q12 adjusted EBITDA margin came in at 45.2%, affected by a lower win percentage in the premium player business; but stayed above management’s guidance previously that ~45% should be the worst it will see. Nevertheless, GS expects to incur more start-up costs associated with the roll-out of the remaining attractions like the Marine Life Park (MLP), which is due for a soft opening in Dec. Nevertheless, management believes it is getting a better handle on the business dynamics and margin recovery should come in 2Q13.
Focus on expanding ASEAN business
Meanwhile management intends to focus its marketing and membership efforts on ASEAN, which includes countries like Malaysia, Indonesia and Greater China. We understand that GS is also looking to extend its reach into non-traditional markets like Russia and the Middle East. Management believes it has established good brand equity with its integrated resort to attract these “medium to long haul” visitors which typically stay longer and spend more.
Downgrade to HOLD
Nevertheless, we are scaling back our forecasts, also taking into account the weaker margins. We also scale back our DCF-based fair value from S$1.66 to S$1.33. Downgrade to HOLD and would be buyers closer to S$1.15.
Genting Singapore (GS) posted 3Q12 revenue of S$670.2m, down 16% YoY and 5% QoQ, where overall revenue was again affected marginally by lower gaming business volume, which also led to lower adjusted EBITDA of S$303.2m, down 19% YoY and 2% QoQ. Reported net profit fell 33% YoY and 16% QoQ to S$140.1m, while estimate core earnings (excluding forex and exceptional items) fell 41% YoY and 16% to S$158.9m. 9M12 revenue fell 11% to S$2159.4m, or 62% of our full-year forecast, while reported net profit fell 32% to S$515.5m; estimated core earnings slipped to S$598.6m, meeting 62% of FY12 forecast.
Adjusted EBITDA margin stays above 45%
3Q12 adjusted EBITDA margin came in at 45.2%, affected by a lower win percentage in the premium player business; but stayed above management’s guidance previously that ~45% should be the worst it will see. Nevertheless, GS expects to incur more start-up costs associated with the roll-out of the remaining attractions like the Marine Life Park (MLP), which is due for a soft opening in Dec. Nevertheless, management believes it is getting a better handle on the business dynamics and margin recovery should come in 2Q13.
Focus on expanding ASEAN business
Meanwhile management intends to focus its marketing and membership efforts on ASEAN, which includes countries like Malaysia, Indonesia and Greater China. We understand that GS is also looking to extend its reach into non-traditional markets like Russia and the Middle East. Management believes it has established good brand equity with its integrated resort to attract these “medium to long haul” visitors which typically stay longer and spend more.
Downgrade to HOLD
Nevertheless, we are scaling back our forecasts, also taking into account the weaker margins. We also scale back our DCF-based fair value from S$1.66 to S$1.33. Downgrade to HOLD and would be buyers closer to S$1.15.
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