- Maintain HOLD on Genting Singapore PLC (GenS) with a lower fair value of S$0.90/share versus S$1.08/share previously. GenS is currently trading at FY15F PE of 19.1x and FY16F PE of 21.2x.

- GenS reported a net loss of S$16.9mil in 2QFY15 due to a S$95.0mil fair value loss on financial instruments and S$84mil unrealised forex loss. Stripping out the fair value loss, we think that GenS’ results would have been above consensus estimates but below our expectations. GenS managed to sustain its normalised EBITDA QoQ in 2QFY15 on the back of cost-cutting measures. We have reduced GenS’ FY15F earnings forecast by 18%.

- We understand that the financial derivatives are equitylinked instruments in respect of listed gaming companies. GenS did not want to disclose whether the gaming companies are listed in North Asia, North America or Australia. GenS takes the view that some of these investments may be strategic in the future.

- Normalising the win percentage and stripping out a S$102.7mil tax refund, GenS’ 2QFY15 EBITDA of S$270mil would have been close to 1QFY15’s S$272mil. In terms of revenue, there was not any sign of a turnaround in the VIP business in 2QFY15 yet. GenS’s win percentage in the VIP segment was also lower at 2.1% in 2QFY15 versus 2.5% in 1QFY15.

- The volume of VIP business fell by 36% YoY and 11% QoQ in 2QFY15. GenS’ market share of the VIP business in Singapore was 47% in 2QFY15 compared with 48% in 1QFY15 and 54% in 4QFY14.

- Market share of the mass market volume of business in Singapore rose from 41% in 1QFY15 to 43% in 2QFY15. However, GenS is unsure if the strength in the mass market business would be sustainable going forward as the depreciation of RM and Rupiah is expected to affect visitorship and spending of customers. A significant number of GenS’ premium mass players come from Malaysia and Indonesia.

- Impairments on trade receivables slid from S$140.3mil in 1HFY14 to S$132.9mil in 1HFY15. On a quarterly basis, the impairments declined from S$$76.3mil in 1QFY15 to S$56.6mil in 2QFY15. The fall in impairments was due to cautious credit extensions and tighter collection process.

- GenS is confident that the casino legislation in Japan will be passed by lawmakers by the end of the year. In South Korea, construction of Resorts World Jeju is expected to start in early-FY16F. The Jeju Assembly passed the casino legislation two months ago. The casino licence regulation, which will be part of the Casino Control Act is envisaged to be passed in 1QFY16. GenS is hoping that Resorts World Jeju would get the casino licence six months after that.

Source: AmeSecurities Research - 14 Aug 2015