Genting SP

Genting SP: Disappointing 1Q13 results may prompt switch to better value Macau peers Adjusted EBITDA, a key measure of profitability for casino plays, dropped 35% y/y to $249.7m, below consensus expectations of $378m, and the lowest since opening. This was despite posting the second highest quarterly VIP rolling chip (+38% y/y, +13% q/q), as the drag came from weak luck factor at 2.12% vs 3.4% in 1Q12. Revenue dropped 15% y/y to $669.6m, while net profit dived 31% y/y to $145.4m, as operating costs continued to rise. On a brighter note, the non-gaming business continued to perform well, registering a healthy growth of 17% y/y. The newly opened Marine Life Park (MLP) remained popular and attracted approx 7,400 visitors daily while Universal Studios Singapore (USS) recorded an average daily visitation of 8,400. The hotel business continued to register high occupancy rate of 92%, with an average room rate of $404. Nevertheless, the Street expects a negative stock reaction in view of the large earnings miss. Prefers exposure to Macau-listed casino operators. Maybank KE downgrades to Hold from buy, with TP $1.70 (from $1.67). Deutsche maintains at Hold, lowers TP to $1.38 from $1.40; cites GENS’ earnings volatility and low yield. UOB Kay Hian maintains Sell with TP $1.17. Nomura keeps at Reduce with TP $1.23. Notes GENS is still trading at a premium to Macau listed casino operators on FY14e EV/EBITDA (12.8x vs Macau’s 11.5x).