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.