Period  2Q14/1H14 for Genting Singapore Plc. (GENS)

Actual vs. Expectations GENS’ 2Q14 results came off from a strong 1Q14 with PAT of SGD131.7m which is still within consensus as the 1H14 PAT of SGD389.2m made up 55% of consensus FY14 full-year estimates. The adjusted 1H14 EBITDA of SGD714.1m accounted for 52% of our FY14 estimates and 50% of market consensus.

Dividends  No dividend was declared as expected.

Key Results Highlights  2Q14 PAT contracted 49% QoQ to SGD131.7m after a 9% drop in revenue as gaming business volume declined. In addition, GENS posted bad debts write-off of SGD81.5m during the quarter. The 2Q14 rolling chip volume fell 16% to SGD15.7m from the record SGD18.6b in 1Q14 while luck factor was maintained at c.3.0%. The non-gaming revenue dipped slightly by 2% as ARPU declined.

 On a YoY comparison, despite topline growing 6%, 2Q14 PAT fell 22% from SGD169.6m, partly due to the SGD81.5m bad debts write-off mentioned above. Although both 2Q14 gaming volume and luck factor were better, the non-gaming revenue was weaker due to lower ARPU and room rates.

 RWS continued to edge out MBS as the market share for rolling chip volume inched up to 60% in 2Q14 from 59% in 1Q14 and was far better than the 49% reported in 2Q13. This is the fourth-straight quarter that RWS had beaten MBS in terms of VIP market share. However, RWS still lagged behind in the mass market as its non-rolling chip market share was maintained at 44% QoQ which was lower than the 48.5% recorded last year.

 The daily average visitor to Universal Studios Singapore improved slightly to 10,000 in 2Q14 from 9,600 in 1Q14 but was similar to 2Q13 while the Marine Life Park saw its daily visitor number rising slightly to 7,000 from 6,400 but dropped from 9,000 in 2Q13. The hotel occupancy rate improved to 94% from 92% in both 1Q14 and 2Q13 but room rates declined both QoQ and YoY to SGD390 from SGD409 previously.

Outlook  The management is more cautious this time as the Singapore Tourism Board is expecting a slowdown in visitor arrivals in Singapore. For its Jeju venture, it is still working to finalise the development plans and secure the necessary approval. In Japan, the Integrated Resorts Promotion Bill was tabled in the lower house in June for discussion. Management is optimistic that the Bill will be passed before the end of this year.

Change to Forecasts No change to our GENTING’s FY14E and FY15E EBITDA estimates for GENS.

Rating NOT RATED for GENS, OUTPERFORM for GENTING.

Valuation  We are keeping our price target for GENTING unchanged at RM12.50/share, based on a 20% discount to its SoP, pending the release of its 2Q14 results this month-end.

Risks  The risks to GENS include a weaker-than-expected business volume and poorer luck factor.

Source: Kenanga