Genting SP

Genting SP: surprise miss in 2Q12 results. EBITDA was $303m, -18% qoq, -11% yoy, falling short of consensus expectations of $349m, on negative VIP and mass gaming revenue growth and higher-than-expected promotional / rebate expenses. VIP rolling volumes declined 10-15% qoq, with a win rate of 3.1% (3.4% in 1Q12). Rolling chip formed 35% of gross gaming revenues. Mass market revenue also declined marginally. Market share stood at 48% for VIP, 47% for mass market. Blended EBITDA margins were 45% (from 50% in 1Q12), mainly due to the incremental operating expenses at the Marine Life Park (soft opening slated for year end). Mgt guides for margins to have bottomed, expects to improve in the next 2 quarters though steady state to be achieved only in FY13. The Street is penciling 45-50% margins over 2H12. Deutsche estimates the Singapore gaming market contracted 17% qoq and 5% yoy to $1.72b. Now expects zero Singapore gross gaming revenue in 2012. Near term sentiment likely to be weak on the earnings miss and lowered growth expectations for Singapore gaming revenue. Deutsche keeps at Hold, cuts TP to $1.21 from $1.36, in view of macro headwinds and potentially new regulatory tightening measures affecting the domestic market, which mgt acknowledges. Citi maintains Neutral, trims TP to $1.34 from $1.40. Nomura reiterates Reduce rating, keeps TP at $1.42.