Genting SP

Genting S'pore (GENS) delivered a stellar net profit of $106.9m (3Q15: $37.2m) reversing 2Q16 loss of $10.5m loss. This brought 9M16 earnings of $107.2m (+29%) to 50% of full year street estimate.

For the quarter, revenue of $581.5m (-9% y/y, +21% q/q) was supported by a lucky VIP win rate (3Q16: 3.3%, 2Q16: 1.7%) in the gaming business ($407.4m, -10% y/y, +23% q/q), as well as increased visitations for its RWS attractions and improved occupancy rate of over 92% across all its hotels in the non-gaming segment ($173.3m, -6% y/y, +17% q/q).

Nevertheless, Maybank KE estimates that VIP volumes fell 45 y/y and 15% q/q to $6b, while mass GGR fell 10% y/y and 5% q/q to $350m. These volumes were record lows.

Cost rationalisation, as well as lower bad debt provisions of $50.2m (-46% y/y, -6% q/q) boosted adjusted EBITDA to $233.6m (+12% y/y, +101% q/q) and drove EBITDA margin of 40.2% (+7.3ppt y/y, +16 ppt q/q) to its highest level in nine quarters.

GENS expects margins to improve further over the next few quarters as it continues to scale down the VIP business and the debt receivables. Management is confident that with the measured approach in premium mass market, GENS could see sustainable earnings growth into the next year.

A typhoon has delayed the construction of 50%-owned Resorts World Jeju. With insurance coverage, damage should be minimal. GENS still expects to be granted a gaming licence in 1Q17.

On the legislation of casinos in Japan, the group is optimistic that the Promotion Bill will be passed by the Diet on 9 Nov.

A surprise 1.5¢ interim DPS was declared (3Q15: nil).

GENS is currently trading at 11.8x EV/EBITDA, contrasting with Macau peers at 14.7x.

Latest broker ratings:
Credit Suisse maintains Outperform with TP of $1.00
UBS maintains Buy with TP of $0.95
CIMB maintains Add with TP of $0.89
JPMorgan maintains Neutral with TP of $0.85
UOB KayHian maintains Buy with TP of $0.84
Nomura maintains Neutral with TP of $0.83
OCBC maintains Hold, raises TP to $0.81 from $0.77
Deutsche maintains Hold and TP of $0.80
CLSA maintains Outperform with TP of $0.80
Morgan Stanley upgrades to Equal-weight from Underweight, raises TP to $0.78 from $0.68
Maybank upgrades to Hold from Sell, raises TP to $0.72 from $0.71