Period

2Q15 for Genting Singapore Plc. (GENS). Actual vs. Expectation

GENS reported 2Q15 net profit of only SGD12.5m, totalling 1H15 net profit to SGD104.2m which only made up 22% of consensus’ FY15 estimates. This was mainly due to: (i) SGD95.0m fair value loss on derivative financial instruments, and (ii) SGD84.0m forex translation losses.

At the adjusted EBITDA level, 1H15 earnings of SGD524.3m accounted for 43%/47% of house/street’s FY15 full-year estimates. The weaker-than-expected results were mainly driven by the drop in casino business volume,

Dividends

No dividend was declared as expected.

Key Results Highlights

2Q15 PAT plunged 86% QoQ to SGD12.5m from SGD91.7m in 1Q15 on the back of 10% drop in topline as gaming business volume declined. The sharp decline in earnings was mainly due to the abovementioned reasons while the decline in topline was driven by continued weak VIP volume which fell another 9.5% to SGD8.43b with poorer luck factor to 2.1% from 2.5%. However, non-rolling chip drop improved slightly by 2.6% to SGD790.3m from SGD770.5m.

YoY, 2Q15 PAT plummeted 91% from SGD131.7m as revenue contracted 23% while 1H15 net profit plunged 73% to SGD104.2m as topline declined 23%. The dismal set of results was attributable to the same reasons as mentioned above. 2Q15 rolling chip volume fell sharply by 46.2% from SGD15.7b with luck factor which deteriorated from 3.0%. 1H15 rolling chip volume also fell significantly by 48.3% to SGD17.7b with luck factor weakening from 3.0% to c.2.1%- 2.5%. On the other hand, non-rolling chip drop fell 9.1% and 12.2% YoY in 2Q15 and 1H15, respectively.

RWS saw its market share for VIP dropping to 47% in 2Q15 from 48% in 1Q15 and 60% in 2Q14. For non-VIP segment, RWS’ market share improved QoQ to 43% in 2Q15 from 41% in 1Q15 but fell slightly YoY from 44% in 2Q14. The total daily average visitor to Universal Studios Singapore (USS) and Marine Life Park (MLP) rose to 18,000 in 2Q15 16,000/17,000 in 1Q15/2Q14 with ARPU of SGD76/SGD27 from SGD81/SGD21 and SGD80/SGD32, respectively. The hotel occupancy rate maintained was at 93% QoQ but lower average room rate of SGD375 from SGD381. Hotel occupancy dropped slightly YoY from 94% but average room rate fell from SGD390 in 2Q14.

Outlook

Management still guided challenging prospects for gaming business, especially the high-roller segment from China while the weakening regional currencies could impact its ASEAN clientele as well. While the construction of Jeju venture is on track, management is expecting the authority to issue the casino license in 2H16. On the other hand, management remains optimistic on the passing of the Japanese Gaming Bill although there were reports suggested that the ruling party LDP may have decided to cease pushing the bill in the current parliamentary session.

Change to Forecasts

No change to our GENTING’s FY15-17E EBITDA estimates for GENS.

Rating

NOT RATED for GENS, OUTPERFORM for GENTING.

Valuation

We are keeping our price target for GENTING unchanged at RM9.78/share, based on a 20% holding company discount to its SoP, pending the release of its 1Q15 results later this month-end.

Risks

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

Source: Kenanga Research - 14 Aug 2015