Another solid quarter for Genting Singapore as VIP segment recovers
KUALA LUMPUR: Genting Singapore plc (Genting Singapore) posted anther solid quarter in 2017 as core earnings rose by five per cent sequentially to the strongest quarterly performance in two years.
Besides a substantial reduction in impairment, the severe decline in gaming volume has somewhat stabilised as it could have bottomed out.
This comes as Marina Bay Sands has been experiencing a recovery in very important people (VIP) business volume in the past year, says analysts at Kenanga Investment Bank Bhd (Kenanga Research).
To note, Genting Singapore reported 2Q17 earnings which beat expectations as core earnings rose five per cent quarter on quarter (q-o-q) to S$159.8 million, bringing total core net profit for the first half of 2017 (1H17) to S$311.8 million -- accounting for 58 per cent of consensus’ FY17 estimates.
“This was attributed to strong VIP and premium mass businesses as the total gaming revenue rose two per cent q-o-q and 33 per cent year on year (y-o-y) as well as lower impairment on trade receivables by two per cent q-o-q and 73 per cent y-o-y to S$14.7 million,” it said in a note yesterday.
At the adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) level, 1H17 earnings of S$576 million also topped expectations, which accounted for 68 and 55 per cent of house and street’s FY17 EBITDA estimates respectively.
“With revenue improving two per cent as gaming revenue rose two per cent, 2Q17 core earnings grew five per cent q-o-q to RM159.8 million; the strongest quarterly earnings since 2Q15,” KEnanga Research ovserved.
“Rolling chip win inched up to three per cent from 2.9 per cent previously but rolling chip volume fell six per cent to circa S$4.5 billion while market share slid to 34 per cent from 35 in 1Q17.
“However, non-VIP volume jumped 22 per cent to S$633 million which we believe was led by premium mass market. Meanwhile, impairment on trade receivable was reduced by two per cent to S$14.7 million from S$15 million previously.
“As such, adjusted EBITDA improved three per cent to S$292.7 million from S$283.2 million in 1Q17.”
Meanwhile, Kenanga Research noted that Genting Singapore’s management continued to be less pessimistic – a stand taken since three quarters ago as the casino operator started to produce improved results.
“Although the business volume is still far from recovery from the peak, the recent quarters indicated that it has likely bottomed out.
“Meanwhile, focus remains in growing the mass and premium mass markets. On the regulatory development in Japan, there is little update but management indicted that it is interested in two of the potential sites, namely Osaka and Yokohama.
“We are keeping our outperform call and price target RM11.30 per share and estimates for Genting unchanged for now, pending the release of its 2Q17 results later this month. Risks to our call include weak business volume and poorer luck factor.”