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FY15 for Genting Singapore Plc. (GENS). Actual vs. Expectation

GENS continued to record another weak quarter with 4Q15 PAT of SGD21.9m, firming up FY15 PAT to SGD193.1m which fell short of consensus’ estimates by 31%. This was mainly attributable to the decline in VIP business volume in 4Q15 despite a much lower bad debts provision of SGD45.3m from SGD92.5m in 3Q15.

At the adjusted EBITDA level, FY15 earnings of SGD914.8m were 8% below our estimate but 2% above market consensus.

Dividends

A 1.5 cent DPS was declared for FY15 which was a pleasant surprise from 1.0 cent in FY14. Key

Results

Highlights

4Q15 PAT plummeted 67% QoQ to SGD22.0m from SGD97.9m in 3Q15 as revenue fell 14% over the quarter despite the abovementioned decline in bad debts provision. This was largely due to the continued decline in casino business volume despite luck factor for the VIP segment improving to 2.1% from 2.8%. Rolling chip volume fell 19% to SGD8.76b from SGD10.85b. Thus, RWS continued to lose its VIP market share to MBS to 38% from 40% but a slight improvement in mass market of 41% from 40% last quarter. Meanwhile, non-casino business was encouraging with Universal Studios Singapore hitting a record attendance of 1.2m.

YoY, 4Q15 PAT contracted sharply by 82% from SGD118.9m as the VIP business volume fell 44% to SGD8.76b from SGD10.85b last year with a slight better win rate of 2.1% from 2.2%. As such, its market share for VIP fell sharply to 38% from 54% while market share for non-VIP dropped to 41% from 43% previously. This caused FY15 PAT to plunge by 70% to SGD193.1m from SGD635.2m as the VIP rolling chip volume fell 43% to SGD43.8b from SGD76.8b previously.

Outlook

Management remains focus in growing mass market, which is a more stable segment, given the challenging prospects for the high-roller segment which emphasise on qualitative factors than quantitative ones. This was reflected in the improvement in provisioning of bad debts. On the overseas front, construction of the Resort World Jeju should start in the immediate term with USD500m capex in 2016 and is on track to be opened next year.

Change to Forecasts

No change to our 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 RM8.52/share, based on a 30% holding company discount to its SoP valuation pending the release of its 4Q15 results next Tuesday.

Risks

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

Source: Kenanga Research - 19 Feb 2016