Period  3Q14/9M14 for Genting Singapore Plc. (GENS)

Actual vs. Expectations Despite reporting the weakest quarterly results since 1Q11, GENS’ 3Q14 results came in within expectations with 9M14 net profit of RM516.3m making up 74% of consensus FY14 full-year estimates. At the adjusted EBITDA level, the 9M14 earnings of RM948.7m accounted for 67%/70% of house/street FY14 full-year estimates.

Dividends  No dividend was declared as expected.

Key Results Highlights 3Q14 PAT dipped 3% QoQ to SGD127.1m after a 14% decline in revenue, no thanks to a decline in gaming business volume and poorer luck factor. The 3Q14 rolling chip volume slid 9% QoQ to SGD14.3b from SGD15.7b in 2Q14 while the rolling chip win percentage dipped to 2% from 3%. On the other hand, non-gaming revenue rose 9% due to better hotel occupancy and room rates.

 YoY, 3Q14 PAT plunged 43% from SGD222.7m while revenue declined 17% due to weaker results from the gaming business. 3Q14 rolling chip volume fell 11% from SGD16.2b while the luck factor dropped from 2.5%. Non-gaming also posted weaker topline by 2%.

 RWS continued to outpace MBS for the 5th-consecutive quarters as the market share for rolling chip volume inched up to 61% in 3Q14 from 60% in 2Q14. This was also higher than 54% market share recorded in 3Q13.

 The total daily average visitor to Universal Studios Singapore (USS) and Marine Life Park (MLP) improved by another 10% to 18,700 in 3Q14 from 17,000 in 2Q14. The ARPU for USS was maintained at SGD80 but MLP’s ARPU dropped slightly to SGD30 from SGD32 previously. On the other hand, the hotel occupancy rate improved to 95% in 3Q14 from 94% both in 2Q14 and 3Q13 while average room rate rebounded to SGD408 from SGD390 in 2Q14 and SGD405 in 3Q13.

Outlook  Despite a slowdown in visitor arrivals, management is optimistic of maintaining its business volume in the coming 4Q14. With the uncertainty of Chinese arrivals, the business volume is likely to be ASEAN-centric in the coming months. For its Jeju venture, it is still working to secure the necessary approval. In Japan, despite concerns of delay in legalising the casino industry, management is optimistic that the first Bill will be passed in Apr/May next 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 RM11.84/share, based on a 20% holding company discount to its SoP, pending the release of its 3Q14 results this month-end.

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

Source: Kenanga