Genting Group’s (GENT) subsidiary, Genting Singapore (GENS) reported an unsurprising set of 1QFY19 results - core-PATAMI of S$208m (+36% qoq; -14% yoy) was largely inline with our and consensus estimates, delivering 28% of forecasts respectively. The weaker yoy performance was mainly due to the decline in gaming volume for its VIP segment, as it lost market share to its competitors. Although management is cautious over the outlook of the VIP segment due to the macro environment, GENS is continuing with its current credit policy.

VIP Volume Threaten by Trade Tension

GENS’s VIP (gross) volume was negatively impacted by the overall decline in industry volume in Singapore and also a loss in market-share to its competitors, which caused the 12-15% decline in its VIP gaming volume. Although we are not too concern about the decline in market share as management is continuing with its current credit policy, management guided that they might tighten its credit if the current trade tension intensifies. We believe that the tightening will no doubt hurt volume, but reduce the risk of bad debts.

Intensifying Competition From Regional Casinos

There could be some downside risk to our volume forecast for the massmarket segment, as the Singapore government has raised the entry levy by 50% (to $150/day) in April recently. Conversely, competition from new regional markets are also intensifying, which could cause some disruption over the near term. However, we are not overly concern as we believe that the volume will return once the novelty effect wears down. Management is also guiding that the new attractions from its $4.5bn redevelopment program will be ready by 2021/22.

Maintain BUY With Unchanged TP of RM11.00

We are keeping our forecast for GENT unchanged, as GENT will be reporting its results by month-end. As such we are maintaining our BUY call and SOTP-based TP at RM11.00. The key downside risks to our call would be i) unfavourable luck factor, and ii) fewer-than-expected highroller arrivals

Source: Affin Hwang Research - 10 May 2019