Analysts positive on Genting Singapore amid 'crisis' valuations

Analysts positive on Genting Singapore amid 'crisis' valuations

Stanislaus Jude Chan
09/11/18, 12:04 pm

SINGAPORE (Nov 9): Analysts are staying positive on Genting Singapore (GENS) amid a selldown which they say is “unjustified”.

Since reporting its 2Q18 results after market close on Aug 3, GENS has seen its share price plunge close to 28%. Shares in GENS closed at $1.23 on Aug 3, and closed at 89 cents on Nov 8.

“In our view, GENS is unjustifiably trading at ‘crisis’ valuations of 5.4x FY19 EV/EBITDA or nearly half the 5-year mean and 1.3x FY19 P/BV or only 0.1x above the Global Financial Crisis trough,” says Maybank Kim Eng Research analyst Yin Shao Yang in a Friday report.

The brokerage is upgrading GENS to “buy”, from “hold” previous, and raising its target price by 3 cents to $1.29.

Over at CGS-CIMB Research, lead analyst Cezzane See agrees that GENS is “unduly pricing in crisis levels”.

“Market [is] unduly pricing in watershed valuations,” See says in a Thursday report. “At 5.8x FY19F EV/EBITDA, the market is pegging GENS to trough valuations of end-FY15 to FY16.”

As she explains it, GENS’ adjusted EBITDA was below $900 million, trade receivable impairments were above $230-260 million per annum, and receivables balance was above $200 million during that period.

“9M18 adjusted EBITDA, trade receivable impairments and end-Sep 18 trade receivable balances are on relatively firmer footing,” See says.

As such, CGS-CIMB is keeping its “buy” call on GENS. However, the brokerage is lowering its target price to $1.28, from $1.44. According to See, the lower target price is “just to be cautious on global uncertainties”.

Meanwhile, Maybank’s Yin says he is “pleasantly surprised” by GENS’ 3Q18 results.

GENS before market open on Nov 9 announced a 46% rise in 3Q18 earnings to $210.4 million from $143.8 million a year ago on lower operating expenses.

Revenue for 3Q18 rose 1% to $639.1 million from a year ago as the group’s revenue continued to grow.

See: Genting Singapore reports 46% rise in 3Q earnings to $210.4 mil on lower operating expenses

“Genting Singapore’s 3Q18 solid performance was due to solid growth in its overall gross gaming revenue (GGR) from both VIP and mass segments,” says RHB’s Singapore Research team, adding that the results were “within expectations”.

“We still like Genting Singapore for its continued focus on growing its VIP segment, and its potential expansion to the Japan market,” RHB says. “We believe the stock is undervalued – since it is trading at a relatively low P/E of 13x, vs the peer average of 18x.”

Amid a transfer of coverage, RHB says it is placing its estimates and target price under review. The brokerage has a “buy” call on GENS with a target price of $1.42.

As at 11.59am, shares in GENS are trading 7 cents higher, or up 7.9%, at 96 cents.

According to Maybank valuations, the stock has an estimated price-to-earnings ratio of 12.9 times and a dividend yield of 3.9% for FY19.

Treasure hunting

British collector and expert Harry Fane talks about what it takes to be the world’s foremost authority on vintage Cartier creations and how to spot a good investment buy at his Vintage Cartier Tank watch exhibition at Dover Street Market Singapore (May 20): Harry Fane’s love affair with Cartier began at the tender age of 17. It was the 1970s and his best friend showed up one day, decked out in two must-have items of the era: a pair of Gucci shoes with a gold buckle — “the height of fashion at the time” — and a Cartier watch. “I remember going, ‘Gosh, I really want both of....

Next stop: The interchange of public and private good

SINGAPORE (May 20): Two-minute intervals between trains. Fewer breakdowns. Clean, new buses running at a higher frequency. Bright LED screens displaying details of stops on both buses and trains. To many commuters who are enjoying these benefits, the meltdown of Singapore’s transport system in December 2011, and again in July 2015, is a distant memory. Certainly, services have improved significantly. There are new trains and buses, while existing ones have been spiffed up. There has been an overhaul of the older rail systems, presumably including fixing the grips for the electricity rail ....

Failed Innopac deal portends mining magnate Gutnick’s woes in Australia

SINGAPORE (May 20): The Australian Securities and Investments Commission (ASIC) is seeking judicial permission to wind down mining company Merlin Diamonds. The regulator is also probing into whether its chairman Joseph Gutnick failed in his duties. Gutnick, who is known as “Diamond Joe”, is under investigation for a A$13 million ($12.3 million) loan made by Merlin to AXIS Consultants, a private company linked to him. Merlin shares have been suspended from trading since October 2018. ASIC is seeking an order to appoint Deloitte to liquidate Merlin, owner of the Merlin Diamond Mine Pro....