Genting SP

Genting SP: tumbled 2.4% yday to close at its lowest in more than 4 years after reporting a big miss in its 3Q14 results. Macquarie believes GENS' results confirm its thesis that the Singapore gaming market is declining at a much faster pace than what the street is estimating. Net profit of $97m was down 150% y/y as VIP volumes declined by 13% YoY, and low win rate of only approximately 2% on VIP contributed majorly to the miss. Overall market volumes fell 22%: While Genting Singapore kept a 61% market share in VIP volumes in 3Q14, overall market volumes are down considerably. MER believes it is the impact of low visitation of Chinese tourists (down 40% ytd in Singapore). 2015 outlook – Best case volumes will be flat; consensus can’t continue building growth: While Genting Singapore CEO guided for a cautious outlook on volume growth, MER thinks the street is still too optimistic. MER thinks best case, Singapore VIP volumes can remain flat at around US$107bn in 2015. On that basis, and a 60% market share in VIP for Genting Singapore, MER struggles to see any growth in profits. At 8.6x 2015E EV/EBITDA, stock is not cheap. MER currently has an Underperform rating on GENS with TP $0.95