GENS – Stronger Competition in Mass Market

Genting Group’s (GENT) subsidiary, Genting Singapore (GENS) reported a relatively good set of 1H18 results - PATAMI came in at S$ 395m (+23% yoy) driven by the VIP segment, which volume grew by 27% yoy as it expended its market share to 50%. 1H18 adj EBITDA of S$625m is also tracking within ours and consensus expectation, delivering 53% and 50% of our respective forecast. A $1.5sen (flat yoy) interim DPS was also announced.

VIP Segment Growth Continues

Management’s decision to further extend credit to its customers has helped to drive 27% yoy growth in its VIP volume, gaining more market share on the expense on its competitors. Its VIP (gross) market share has improved to 50% in 2Q18 from 34% in 2Q17. Despite the strong growth from VIP segment, revenue and EBITDA for 2Q18 is down yoy, due to the low win rate. Some weakness experienced in the mass market had also some negative impact on margin.

Increased Competition From Regional Casinos

VIP business from clients of its traditional market (China, Malaysia, Indonesia and Indochina) continue to flourish, driven by the availability of credits. However, its mass market is facing stronger competition from the regional players, but has intensified recently with the opening of new casinos in the Indochina region. We nevertheless believe that this could be a blip, as the shift in demand could be due to novelty effect, and could normalised in the coming quarters.

Maintain BUY With An Unchanged TP of RM12.80

We believe that this is a decent set of results from GENS, and the positive impact on GENS share price could benefit GENT. Each SGD0.01 rise in GENS’ share price would positively impact GENT’s share price by RM0.04, based on our estimates. We reiterate our BUY call on GENT and SOTPbased 12-month TP of RM12.80. GENT is expected to announced its 2Q18 results by 28th Aug 2018.

Risks

The key downside risks to our call would be i) unfavourable luck factor, and ii) fewer-than-expected high-roller arrivals.

Source: Affin Hwang Research - 6 Aug 2018