Morningstar | Genting Singapore’s 3Q Results Within Expectations; Favorable Risk Reward After Price Correction
There is little in narrow-moat Genting Singapore’s third-quarter results that alters our view on the firm. Third-quarter adjusted EBITDA of SGD 319 million, was flat year over year but up 20% quarter over quarter, in line with our expectations. The stronger sequential results were aided by higher VIP rolling volume, normalized win rate and robust nongaming business from Resorts World Sentosa, or RWS. We keep our earnings forecasts and fair value estimate of SGD 1.38. Genting’s share price has corrected by about 30% since August due to concerns of weakness in VIP business on China’s slowing economy and intensifying regional competition. Nonetheless, the firm’s business is holding up well and we think the shares are undervalued given the favorable risk reward.Genting’s VIP volume market share remains promising at 47% in the third quarter versus 37%, a year ago, with rolling chip volume rising 13% year over year. VIP business’ win rate also recovered to 2.9% from 2.6% in the last quarter. Although impairment on trade receivables increased to SGD 13 million from SGD 0.5 million in the previous quarter, the magnitude is still within our expectation. Management guides that the firm will continue to extend its credit policy for the VIP business and see risk of impairment manageable. Although the firm has yet to experience any slowdown in its VIP business, management is mindful of the risk from the spillover impact of the U.S.-China trade war and will continue to monitor the situation closely.
Genting is aiming to reveal more details on the RWS’ revitalization project in the coming quarter. We believe this project is necessary to help the firm to defend its position given the increasing regional competition, as reflected in the firm’s lackluster mass market gaming performance. On the other hand, there is limited update on the Japan’s casino plan although the firm expects the bidding process for the Integrated Resorts to start in second half of 2019.
Genting Singapore is an investment holding company. Through its subsidiaries, Co. is engaged in in the development, management and operation of integrated resort destinations including gaming; hospitality; meetings, incentives, conventions, and exhibitions (MICE); leisure and entertainment facilities. Co. owns Resorts World Sentosa in Singapore, a resort destination that provides a casino, Adventure Cove Waterpark, S.E.A. Aquarium, Universal Studios Singapore theme park, MICE facilities, hotels, restaurants and specialty retail outlets.
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