Genting Singapore

Kim Eng on 3 Feb 2014

What’s New
MBS reported a 14% YoY drop in 4Q13 EBITDA to USD258.8m due to a 17% YoY contraction (in USD terms) of 4Q VIP volume that was exacerbated by a low VIP hold rate of 1.92%. 4Q13 mass market GGR (table and slot) did not help much either, posting just 3% YoY growth (in USD terms). The only silver lining is that the Japanese casino liberalisation process may be fast tracked by a year.

What’s Our View
Assuming Resorts World Sentosa (RWS) commands a 47-48% VIP volume share, we can expect GENS to also report 4Q13 VIP volume contraction of ~17% YoY to ~SGD16b. This would bring RWS’ 2013 VIP volume to SGD74.5b, in-line with our forecast of SGD75.3b.

For mass market GGR, if RWS retained its 3Q13 market share of 44% in 4Q13, we estimate its 4Q13 mass market GGR would have eased by 5% YoY. This would bring its 2013 mass market GGR to SGD1.7b, or a tad below our forecast of SGD1.8b. GENS will release its 4Q13 results on 20 Feb 2014. While likely to be within expectations, we expect it will report a sequentially higher 4Q13 EBITDA of ~SGD350m and net profit of ~SGD200m as we do not think its VIP hold rate will be as poor as MBS’. We leave our estimates unchanged for now.

Nonetheless, we believe the consensus is too bullish on GENS’ earnings outlook and it is still premature to assign any “Japanese casino” option value to its share price as request for proposals are
only likely to be issued in 2015, at the earliest. Maintain SELL on GENS and TP of SGD1.31, based on 10x FY14E EV/EBITDA.