Genting Singapore

Kim Eng on 16 Feb 2012



Look to 2012. Genting Singapore (GENS) will release its 4Q11 results on 22 February 2012. We expect it to record 4Q11 EBITDA of about $350m, bringing 2011 EBITDA to $1.6b (+15% YoY), within expectations. We understand that the mass market segment compensated for slower VIP volume in 4Q11. Going forward, we are upbeat on 2012 post the opening of the Equarius Hotel & Beach Villas and potential expansion into Japan and Mongolia. Maintain Buy with the target price raised to $2.10.


Mass market segment encouraging. We understand that the school holidays and new Transformers ride that opened on 2 December 2011 had a positive effect on the number of casino patrons to Resorts World Sentosa (RWS) in 4Q11. The number of slot machines and electronic table games (ETG) was ramped up to its legal limit of 2,500 by the third week of January 2012. Thus, we expect 4Q11 mass market gross gaming revenue (GGR) to have grown both QoQ and YoY.


VIP segment wanting... We were initially pleased that Marina Bay Sands’ (MBS) 4Q11 VIP volume plunged 32% QoQ to $13.9b, implying that RWS gained VIP volume QoQ. That said, we understand that RWS’s gaming area utilisation rate grew from about 85% in 3Q11 to about 90% in 4Q11 only due to the added slot machines and ETGs, implying that its 4Q11 VIP volume was little changed QoQ at approximately $16b.


... but “rectifiable”. MBS attributed its 4Q11 VIP volume plunge QoQ to tighter credit policy. RWS had already tightened its credit policy in 3Q11 after providing $56.9m (11% of VIP GGR) in doubtful debts then. We gather that RWS’s tepid VIP segment in 4Q11 was due more to the delayed opening of Equarius Hotel & Beach Villas to 16 February 2012 and the short three-week gap between the Gregorian and Chinese New Year.


Maintain Buy but raise TP to $2.10. Our estimates are relatively unchanged. We roll forward our DCF-based target price from end-2011 at $2.02 to end-2012 at $2.10. Going forward, we are optimistic on 1Q12 post the opening of Equarius Hotel & Beach Villas (220 rooms) that will nearly triple RWS’s VIP room inventory. We are also upbeat on GENS’s potential expansion into Japan and Mongolia.