Thursday, February 23, 2012

Genting SP

Genting SP: 4Q11 results slightly below consensus, despite the boost by luck factor.
RWS adjusted EBITDA came in at $406m, +8% qoq, and RWS EBITDA margin was 52% vs 48% in 3Q. This was boosted by a record high VIP win rate of 3.9% (vs 3Q11's 3.2% and normalized expectation of 2.85%), otherwise normalized EBITDA would have been only ~$300m.
The headline EBITDA numbers masked sequentially weaker volumes (VIP: -26% qoq, mass: -7% qoq), which confirms the first sequential drop in VIP volumes for Spore’s gaming market.
The silver lining was that RWS recovered share, 49% of Spore gross gaming revenue (GGR) in 4Q, vs 48% in 3Q, and 47% of the VIP rolling chip volume vs 44$ in 3Q.
Investors may also cheer the maiden 1ct div.

While mgt guided for a slightly more positive outlook for 2H12, key risks are possible rise in bad debt provisions and high operating expense relating to the 2nd phase opening of hotels and new facilities.
GENS also said it is planning to issue perpetual capital securities and has received a rating of Baa1 from Moody’s and A- from Fitch, the highest for any gaming co in the world, as mgt said it was looking to invest in new projects.

Plenty of downgrades from the Street.
Citi maintains Sell with TP $1.47 (from $1.50)
Nomura reiterates Reduce with TP $1.41.
HSBC downgrades to Neutral with TP 1.74 (from $1.99)
JPM keeps at Neutral but lowers TP to $1.90 from $1.95.
Goldman keeps at Buy, but lowers TP to $2.16 from $2.22.

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