Genting SP

Genting SP: UOB Kay Hian upgrades to Hold with $1.42 TP. The house note that despite disappointing earnings, share price has held up strongly as investors are presumably willing to re-rate the stock after imputing “option value” from greenfield and M&A activities amid rising valuations of regional gaming companies. House recent visit to Resorts World Sentosa (RWS) reaffirmed cautious view on the underlying operations, especially on the mass segment. This is largely due to: a) saturation in the mass segment, b) inferior location vs its competitor’s, and c) limited hotel rooms. GEN SP has however re-rated alongside regional peers. Share price has appreciated by 19% from Aug 13 low, in tandem with the re-rating of regional gaming peers, especially from Macau. GENS is currently trading at 13x 2014F EBITDA against >15x by Macau peers (see table overleaf). Although continues to believe that imputing a significant option value for breaking into the Japanese market is premature, also think investors are willing to pay some ‘option value’ for potential sizeable M&A opportunities in Asia.