Genting Singapore kept at 'buy' with $1.23 target by RHB on stable earnings, market share gains
SINGAPORE (Feb 18): RHB Research is maintaining Genting Singapore at “buy” with target price of $1.23 on the back of stable casino earnings, market share gains and the company’s potential to tap into the Japan market, bolstered by its net cash balance of $2.9 billion.
In FY18, tourist arrivals into Singapore also hit a new high of 18.5 million vs 17.4 million in FY17, mainly driven by visitors from China, Indonesia and India, owing to strong travel demand and better flight connectivity.
Singapore also registered 6% growth in tourist spending on entertainment, sightseeing and gaming – which bodes well for Genting Singapore’s non-gaming divisions as well as its casino earnings.
“We expect Genting Singapore to report $184 million-$201 million in PATAMI for 4Q18 (-5 to -13% q-o-q, +23 to 34% y-o-y). It is trading at a relatively low 7.3x EV/EBITDA (regional peer average is 12.3x, 5-year historical mean is 10x), which we deem as unjustified,” says RHB in a Feb 15 results preview.
The Resorts World Sentosa operator will announce its 4Q18 results on Feb 21.
In 4Q18, Marina Bay Sands (MBS) reported lower 4Q18 EBITDA of US$362 million ($491 million), down 21% y-o-y, mainly on softer rolling volume due to heightened competition from neighbouring countries. This alsoresulted in a decline in EBITDA margin to 50%.
But based on indicators from MBS’s 4Q18 results, RHB says Genting Singapore could see double-digit growth y-o-y in rolling volume, on an overall gain in market share, which averaged 49% for 9M18 (vs 36% in FY17).
Assuming market share of 47% and normalised win rate in 4Q18, FY18 EBITDA could come in within the range of $1.25-1.30 billion, vs the Street estimate of $1.24 billion.
“Resorts World Singapore (RWS) is on course to deliver double-digit growth in FY18 EBITDA and core PATAMI,” says RHB, “Moving forward, it could maintain its market share, in view of Genting Singapore’s focus to expand in the premium and VIP segments, with better credit facilities. “
As at 1.00pm, shares in Genting Singapore are up 2 cents at $1.10 or 15.6 times FY20F earnings.
