Genting SP: UBS reaffirms Buy rating but cuts TP from $1.30 to $1.15 on EBITDA estimates cuts due to weakness in VIP rolling chip and higher bad debt provisions.
VIP rolling chip volume declined for two straight quarters by -12% y/y and -24% y/y in 3Q14 and 4Q14 respectively, the result of China’s anti-corruption campaign. The house expects volume to continue the decline, by 18% in FY15E.
Increasingly challenging debt collection situation is expected to lead to higher provisions in FY15E.
The mass segment has shown signs of recovery in 2H14 and momentum is expected to extend into 2H15, firstly on a low base and secondly on the opening of a new hotel in Jurong with 550 rooms.
Growth in mass segment should roughly offset declines in VIP.
FX impact should be benign in 2015E as SGD is forecasted to decline by 5% against CNY but appreciate by 3% and 1% against MYR and IDR.
UBS pegs valuation conservatively to 8.0x FY15E EV/EBITDA, at 1SD below five-year average.
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