Results

• FY17 core PATAMI of SG$648.1m came in within expectations, accounting for 99.8% and 95.3% of HLIB and consensus FY estimates, respectively.

Deviations

• None.

Dividends

• Proposed a final dividend of 2.0 cents (4Q16: 1.5 cents), bringing FY17 total dividend to 3.5 cents.

Highlights

• QoQ : 4Q17 revenue dropped by 7.6% due to normalization of win rate from a high in 3Q17, which more than offset the marginally higher volume of business. Core PATAMI was down by 20.9% due to lower revenue and higher staff cost.

• YoY: 4Q17 revenue grew by 4.7% attributable to higher gaming volume as well as higher visitors. Core PATAMI increased by 42.5% on the back of improved margin driven by cost efficiency initiatives and significantly lower bad debt provision.

• FY17: FY17 core PATAMI improved by 127.3% given the higher revenue (+7.4%) resulting from higher market volume as well as higher operating margin after the recalibration of credit policy, commission structure for VIP business as well as write-back from bad debt provision.

• Given the growing optimism on the overall regional market condition and improvement in the quality of receivables, management is now willing to relax the credit policy to grow its market share for premium business.

• On Japan, the implementation bill for Japan casino will be tabled in the current legislative session which runs until June 2018, as indicated by Prime Minister Shinzo Abe. Hence, bidding invitation may only occur towards the end of FY18 or early FY19 after it has been passed by the upper house.

• It is understood that the integrated resorts legislation framework would be similar to that of in Singapore and the management is adamant to bid for the Japan IR license with Osaka looking likely to be one of the destinations.

Risks

• 1) Regulatory risks; 2) Further decline in RWS’ market share to MBS; and 3) Weaker-than-expected hold percentage.

Forecasts

• Unchanged.

Rating

HOLD ↔ , TP: SG$1.27 ( ↔ )

• Maintain HOLD as we believe the current valuation may not be attractive despite the growing optimism and improving operating environment. Besides, we believe the growth outlook is challenging due to stiff competition and any delay in the tabling of implementation bill in Japan may keep the interest at bay.

Valuation

• TP is unchanged at SG$1.27 based on unchanged EV/EBITDA multiple of 11x, aligned with peers’ average multiple (see Figure #5).

Source: Hong Leong Investment Bank Research - 26 Feb 2018