Genting Singapore

AmResearch, 31 Jan 2013

WE are keeping our "hold" recommendation on Genting Singapore, with a higher fair value of S$1.50/ share versus S$1.35/share previously.

We have raised the terminal growth rate in Genting's DCF (discounted cash flow) from 5 per cent to 6 per cent as the economic recovery in China should result in increased casino patronage from the country.

Las Vegas Sands reported its Q4 FY2012 results on Wednesday, which were below consensus estimates due to lower wins from Singapore and Las Vegas. However, the group's revenue beat expectations on the back of an improvement from Macau.

In spite of a lower win percentage y-o-y in Q4 FY2012, we consider Marina Bay Sands' (MBS) results to be impressive because of the strong recovery in the volume of VIP business.

The volume of VIP business in Q4 FY2012 was the second-highest in MBS' quarterly earnings history. Rolling chip volume surged 39.7 per cent q-o-q to US$16.5 billion in Q4 FY2012. We believe that the recovery in the rolling chip segment could be due to seasonal factors.

Win percentage in the VIP segment continued to be lower than the theoretical range for the second consecutive quarter.

However on a q-o-q basis, win percentage improved from 1.79 per cent in Q3 FY2012 to 2.14 per cent in Q4 FY2012. The win percentage in the rolling chip segment is usually between 2.7 per cent and 3 per cent ...

Looking at MBS' Q4 FY2012 results, we wonder if "Resorts World Sentosa" was able to capture the seasonal uptick in the VIP business in Q4 FY2012. In Q3 FY2012, MBS' market share of the VIP volume of business in Singapore was 53 per cent.

Going forward, Genting is expected to be affected by pre-operating expenses in respect of its Marine Life Park and Aquarium. Hence, Genting's Ebitda margin is likely to remain under pressure until mid-FY2013 forecast.

HOLD