GENS

GENS: 2Q14 results missed street expectations. Net profit fell 22% y/y to $131.7m, while adjusted EBITDA rose 1% to $313.8m (against consensus of $347m), as bad debts hit a new high of $82m amid tight credit conditions in China. Group’s revenue rose 6% to $751m, buoyed by higher gaming revenue (+9% to $596.9m) which offset a decline in non-gaming revenue (-3% to $153.6m). VIP volume grew by an estimated 12% y/y, but fell 17% q/q. Luck factor remained slightly above average with a win rate of 3%. Growth in the mass segment was flat y/y and q/q, as a stronger SGD deterred tourists. Outlook expected to remain weak, particularly if GENS extends less credit to Chinese VIPs and ends up ceding volume share to MBS going forward. On the Japan IR bill, management is confident that the bill could be passed late this year. Consensus feels that Japan ops will begin only in 2020 and beyond, given uncertainties like location, structure, tax rate etc. On the Jeju resort front, construction is likely delayed till 1Q15, as the new governor of Jeju reviews the plan. That said, this will pose limited impact on earnings as Jeju is a small market. GENS is currently trading at 10.5x FY14e EV/EBITDA. Latest broker ratings: Maybank KE maintains Hold with TP of $1.24 JP Morgan maintains U/W with TP of $1.21 Nomura maintains Buy with TP of $1.52 CIMB maintains Add to TP of $1.72