CFA Society Singapore
SINGAPORE (Jan 28): UOB Kay Hian is maintaining “overweight” on gaming with a “buy” call on Genting Singapore (GENS) at a $1.38 target price, or 10 times 2019 EV/EBITDA, on the notion that the integrated resort (IR) operator’s share price could gain momentum on its bidding for Japan’s IR concessions.
This comes as the research house expects GENS’s operational performance to outperform that of Marina Bay Sands (MBS), whose VIP and mass market gaming volume continued to deteriorate y-o-y over 4Q18.
In a report last Thursday, analyst Vincent Khoo notes that GENS’s valuation remains attractive at 7.1 times 2019 EV/EBITDA, which is below -1 S.D. to its mean, at the share price of $1.09.
“We expect valuations to trend up over time, supported by its unexciting but stable Singapore operations and its bidding for Japan’s IR concessions building up to the request for proposal (RFP) stage,”says Khoo.
His target price for GENS has also imputed an “option value” of 10 cents for the Japan greenfield opportunity, assuming a 30% success rate; US$10 billion development cost with implementing rules and regulations (IRR) and a 50% joint venture (JV) stake.
Going forward, Khoo is anticipating RWS to post stronger 4Q18 VIP segment growth in comparison to MBS’s, although he cautions that the former group could face similar weakness in terms of mass market segment growth, due to rising competition from emerging casinos from IndoChina.
“Despite expecting a flat year for industry GGR, Japan’s legalisation of integrated resorts (IR) has put the two Singapore casino operators [GENS and MBS] as strong candidates in the IR bidding, given their experience in operating in a highly-regulated casino environment and track record in contributing to the country’s tourism,” notes the analyst.
As at 10.33am, shares in GENS are trading 3 cents higher at $1.09, which implies a 2.8% FY19F dividend yield.