Time to place bets on Genting Singapore as stock is now looking cheap, says RHB

Time to place bets on Genting Singapore as stock is now looking cheap, says RHB

Michelle Zhu
16/11/18, 03:36 pm

SINGAPORE (Nov 16): RHB Research is maintaining its “buy” rating on Genting Singapore with a lower target price of $1.23 compared to $1.42 previously after updating DCF assumptions and rolling over the valuation base year to FY19.

At the share price of 93 cents, RHB thinks the stock is undervalued as it is trading at a discount to its five-year EV/EBITDA average of 10 times.

The revised target price translates to an implied EV/EBITDA of 9 times, which the research house deems close to Genting Singapore’s historical average.

Commenting on the group’s latest earnings performance in 9M18, RHB notes how trade receivables rose 42% y-o-y to $654 million compared to a slowdown of 57% in 9M17 – a result of the group slowly loosening the tap for its VIP customers.

“As this was accompanied by a 13% YoY increase in VIP rolling chip volume, we believe the company could have granted higher credit limits to its premium and VIP customers. As a result, Genting Singapore is likely to attract and retain a higher volume of premium and VIP customers, leading to an expansion in its gaming market share in Singapore,” says RHB in a report on Thursday.

The research house also sees the group’s reinvestment proposal for RWS, which remains at the discussion stage, as well as recently set-up offices in Osaka, as re-rating catalysts for the long term.  

Going forward, RHB believes Genting Singapore’s earnings will be buoyed by its existing facilities at Resorts World Sentosa (RWS) as they continue to gain tourist traction, which in turn, would drive the casino business.

“In view of a resilient financial performance, sustainable margins and expansion of its market share, we think the current share price is unjustified,” concludes RHB.

As at 3:28pm, shares in Genting Singapore are trading 0.53% lower at 94 cents or 1.44 times FY18F book value.

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....