Genting SP

Genting SP: Deutsche downgrade to Hold with TP $1.90. House notes that initial startup growth easing. Despite good long-term growth, expect short-term headwinds. Add that 2Q gaming trend likely to disappoint and expect MBS to gain market share,
FY11-13E earnings trimmed; push junket approval to 2012E.

Tip GENS to have lower-than-previously assumed market share of 55% (vs 58%) and 53% (vs 55%) in FY11-12E. Without junkets, expect SG gaming market to grow at a slow 15% in 2012E.

Deutsche expects GENS 2Q results to be weak, on the back of 2Q having no CNY holidays (seasonality effect) and a highly volatile VIP hold rate and less VIP rolling in 2Q. Says its channel checks suggest weak 2Q gaming trend as the initial strong startup growth eases off, and as MBS appears to be gaining more ground in the mass market with rollout of Electronic Table Games (ETGs) and new variation games.

Expects GENS to be better placed to capture mass market share in 2012, when it opens its West Zone, with new non-gaming offerings. Says junket approval is likely to be pushed back to 2012 due to changes at CRA and investigations of illegal junket operations causing delays to previous plans.
Downgrades GENS to Hold from Buy and TP lowered to $1.90 from $2.43 based on 13X EV/EBITDA vs 14X previously. Highlights that if share price overshoots fundamentals, $1.62 is a good entry level.

On the flip side, HSBC believes that the Singapore market offers a good platform for growth. Acknowledges the erosion in mass market and delayed junket approval, but cites GENS dominance in the VIP market and ability to generate FCF from 2012 as positives. Maintains TP at $2.22, but Upgrades to Overweight from Hold on valuations.
Stock currently trades at 22.8X P/E.