Genting Singapore

OCBC on 11 May 2012

Genting Singapore (GS) posted 1Q12 revenue of S$787m (-14.7% YoY), meeting 21.3% of our full-year forecast – slightly softer than expected. Net profit came in around S$211.5m (-30.9% YoY), or 20.8% of our FY estimate, as overall revenue was affected by lower win percentage and lower business volume in the premium player business. Going forward, management plans to focus on boosting its visitor numbers to its theme park and remains positive on the prospects of IMA over the longer term. Since 1Q12 results were slightly below our forecast, we opt to trim our FY12 estimates by 5-5.3% and FY13 by 2.3-2.4%, noting the impact of IMAs will likely be felt in 2013. This also eases our DCF-based fair value from S$2.02 to S$1.97. And with a sizable cash pile, we believe that an acquisition is likely on the card, although an IR in Japan has slipped down GS’ priority list. Maintain BUY.

1Q12 results slightly under
Genting Singapore (GS) posted 1Q12 revenue of S$787m (-14.7% YoY), meeting 21.3% of our full-year forecast. Revenue was slightly softer than expected, as overall revenue was affected by lower win percentage and lower business volume in the premium player business. But GS noted that overall casino gross revenue grew by 9% QoQ as a result of higher business volume in all gaming business segments. Net profit came in around S$211.5m (-30.9% YoY), or 20.8% of our FY estimate, affected by the lower revenue and higher depreciation expense as GS continues to expand the IR. However, this was mitigated by lower finance costs.

Near-term focus on USS
USS saw daily visitor numbers of 8.2k with an average spend of S$88, with the successful launch of the Transformers the Ride in Dec 2011. Since the break-even point is ~6-7k daily visitors, GS revealed that a number higher than that falls very quickly to the bottom line. Hence, GS will continue to focus on drawing visitors to USS. Additionally, GS is also positive on the issue of the IMA (International Marketing Agent) licenses and revealed that one has started operating in the first week of May. While it does not expect to see any significant revenue boost in the near term, it is hopefully of seeing more approvals over the next 12-18 months, especially for some bigger and better-funded operators.

BUY with new S$1.97 fair value
Since 1Q12 results were slightly below our forecast, we opt to trim our FY12 estimates by 5-5.3% and FY13 by 2.3-2.4%, noting the impact of IMAs will likely be felt in 2013. This also eases our DCF-based fair value from S$2.02 to S$1.97. And with a sizable cash pile, we believe that an acquisition is likely on the card, although an IR in Japan has slipped down GS’ priority list. Maintain BUY.