SINGAPORE (Aug 6): The mid-term prospects for Genting Singapore are intact as VIP credit policies are likely to remain unchanged, given the comfort level the mega resort operator has with its current portfolio of clients, says CGS-CIMB Securities is recommending an “add” with $1.44 target price.

To recap, estimated 2Q18 VIP gross gaming revenue (GGR) came in 10.1% higher at $207 million from year ago. While estimated rolling-chip volume grew a 27% to $7.9 billion; this was softened by lower luck factor of 2.6% versus 3.0% in 2Q17.

See: Genting Singapore reports 24% rise in 2Q18 earnings to $177.6 mil

Estimated VIP market share grew to 50% as Genting Singapore managed to keep a hold on its VIP portfolio. Overall estimated 1H18 VIP GGR grew 29.5% with market share rising to 49.4% versus 1H17 VIP GGR of $389.5 million and market share of 34.9%.

Estimated 2Q18 mass GGR and market share slipped 2.8% to $364.7 million and 37.8% versus 40.3% in 2Q17, respectively. While CGS-CIMB already expected softness in market share due to the flat RM/S$ in 2Q18, it believes Genting Singapore market share was also impacted by regional competition like the opening of Naga 2 in Cambodia.

Looking ahead, Genting Singapore says it is looking to improve the mass volumes. Overall estimated 1H18 mass GGR was relatively unchanged -- just up 1% -- while market share settled at 39.7% versus 39.5% in 1H17.

2Q18 trade receivable impairments were significantly low at $0.48 million versus $14.7 million in 2Q17 with some write-backs. Management guided that while it is has loosening its credit policies, it plans to do it in a measured way.

“While 1H18 trade receivable impairments of $9.5 million account for only 24.5% of our full-year estimate of $39 million, we keep our forecasts unchanged in the event this normalises in 2H18F,” says lead analyst Cezzane See.

Genting Singapore reiterated its commitment to a Japan investment, and is confident that it will be able to put a strong case despite the strong competition. It expects a request for proposal (RFP) by FY20-21F, which implies construction would potentially start earliest in FY21F, says CGS-CIMB.

“Out of the intended three sites sanctioned by the recent bill, Osaka and Yokohama sites seem pretty certain,” adds See.

As at 12.31pm, shares in Genting Singapore are down 9 cents at $1.14 or 18.7 times FY19F normalised earnings.