GENS - Higher Dividend Came as a Surprise

Genting Group’s (GENT) subsidiary, Genting Singapore (GENS) reported a relatively good set of numbers for 2017. PATAMI came in at S$ 601m (+125% yoy) driven by the recovery in the VIP segment. Although in 4Q, EBITDA recorded a qoq decline, after 3 strong consecutive quarters of growth, we are not perturbed, as the drop was caused by lower win rate and also higher staff expenses during the quarter. Management also announced a S$2sen DPS, which is higher than the S$1.5sen previously anticipated.

Credit Policy Will Continue to Drive Growth

Although the receivable levels continue to trend down qoq, management has indicated there is no change to the current credit policy, as their recent success in expanding its VIP segment market is reliant on credits extended to its VIP customer. The decline in revenue for the 4Q wasn’t due to the decline in VIP volume, but the normalisation of win rate to 2.7% (close to the theoretical hold rate). The win rate for the first 3 quarters of 2017 was ~3.0%. As such, we believe GENS will continue with its credit policy to drive growth.

Higher Dividend a Pleasant Surprise

While the decline in EBITDA during the quarter was a negative surprise, we are not overly perturbed, as management has indicated that it was due to higher bonuses allocated to its staff (the bonus payment was significantly less in 2016 due to its lacklustre results). Despite the lower EBITDA in 4Q, management has proposed a final DPS of S$ 2sen (2017: 3.5sen), which is higher than the anticipated S$1.5sen. Management indicated that they are still comfortable with their current balance sheet, which is sufficient to fund the refurbishment of GENS and the Japan IR bid.

Maintain BUY With An Unchanged TP of RM12.33

The higher dividend payout could be a positive catalyst for GENT’s share price. Each SGD0.01 rise in GENS’ share price would increase GENT’s share price by RM0.04, based on our estimates. We reiterate our BUY call on GENT and SOTP-based 12-month TP of RM12.23. GENT is expected to announced its 2017 results by 27th February 2018.

Source: Affin Hwang Research - 26 Feb 2018