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Betting on Genting Singapore as action returns to the tables

Stanislaus Jude Chan
Stanislaus Jude Chan11/8/2017 11:59 AM GMT+08  • 2 min read
Betting on Genting Singapore as action returns to the tables
SINGAPORE (Nov 8): Analysts are betting on Genting Singapore (GENS) after the integrated resort and casino operator beat 3Q forecasts on the back of growth in both VIP volume and mass market gross gaming revenue (GGR).
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SINGAPORE (Nov 8): Analysts are betting on Genting Singapore (GENS) after the integrated resort and casino operator beat 3Q forecasts on the back of growth in both VIP volume and mass market gross gaming revenue (GGR).

GENS saw a 35% jump in earnings to $143.8 million for the 3Q ended September.

Driven by VIP GGR and tight cost controls, adjusted EBITDA surged 37% to $320.1 million during the quarter.


See: Genting Singapore posts 35% increase in 3Q earnings to $143.8 mil

“3Q17 adjusted EBITDA margin of 50.8% was the highest since 1Q12, and brought 9M17 adjusted EBITDA margin to 48.4%, closer to the levels seen in 2011/2012,” says CIMB Research lead analyst Cezzane See in a report on Monday.

CIMB is keeping its “add” rating on GENS and raising its target price to $1.45, from $1.35 previously.

See also: UOB Kay Hian upgrades Frencken to 'buy' due to 'positive outlook' for its key customer and improving cost pressures

This comes on the back of higher adjusted EBITDA forecasts for FY17-19F.

“We raise our adjusted FY17-19F EBITDA by 6.7-8% as we increase our gaming revenue given better VIP growth in FY17-19F,” says See. “Our changes consequently lead to FY17-19F EPS increasing by 13-16.4%.”

Maybank Kim Eng Research analyst Yin Shao Yang notes this was the first time quarterly VIP volume grew y-o-y since 2Q14, and the first time quarterly mass market GGR grew y-o-y since 1Q16.

See also: Citi maintains 'buy' rating on Genting Singapore off the back of MBS results beat

“GENS attributed this to its new premium mass and slot gaming areas,” says Yin. “This is a positive development as 3Q16-2Q17 earnings growth y-o-y had been largely driven by cost savings.”

Maybank is maintaining its “buy” call on GENS with a higher target price of $1.42, from $1.35 previously, with EBITDA forecasts for FY17-19F raised by 4-5%.

“While naysayers may say that the higher-than-expected 3Q17 VIP volume was due to VIP volume share gains, note that 3Q17 industry VIP volume did grow by approximately 30% y-o-y,” says Yin. “This was driven by the recovering Macau VIP market ‘spilling over’ to the Singapore one.”

As at 11.54am, shares of Genting Singapore are trading 3 cents higher at $1.30. According to Maybank forecasts, this implies an estimated price-to-earnings ratio of 19.6 times and a dividend yield of 2.5% in FY18.

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