Genting Singapore’s 2Q18 results inline, Japan outlook bright
KUCHING: Genting Singapore’s results for the second quarter of 2018 (2Q18) came within expectations as it brought its first half’s ( 1H18) core income to S$ 403.1 million – making up 51 per cent of consensus FY18 estimates.
Despite being inline, the earnings for 2Q18 saw a 32 per cent sequential decline and the research arm of Kenanga Investment Bank Bhd (Kenanga Research) attributed it to poor luck factor as Resort world Sentosa saw its rolling chip win falling to 2.6 per cent in 2Q18 from 3.2 per cent in 1Q18.
This was the similar situation faced by its main competitor Marina Bay Sands.
“As such, 2Q18 adjusted EBITDA contracted 26 per cent to SGD265.9 million from S$358.9 million. On a hold-normalised basis, the adjusted EBITDA could have been circa SGD293 million,” said the research arm.
On the other hand, research arm of Affin Hwang Investment Bank Bhd ( AffinHwang Capital) reckoned that Genting Singapore’s results had done better than expected and would benefit Genting Bhd (Genting).
“We believe that this is a decent set of results from Genting Singapore and the positive impact on Genting Singapore’s share price could benefit Genting
As such, 2Q18 adjusted EBITDA contracted 26 per cent to SGD265.9 million from S$358.9 million. On a holdnormalised basis, the adjusted EBITDA could have been circa SGD293 million. Kenanga Research
Bhd.
“Each S$0.01 rise in Genting Singapore’s share price would positively impact Genting’s share price by RM0.04, based on our estimates,” said AffinHwang Capital.
Looking forward, Genting Singapore’s prospects will be heavily dependent on their possible expansion in Japan.
According to Kenanga Research, the Japanese Diet has enacted the integrated resorts (IR) implementation bill on July 20 and has confirmed three sites of IR with Osaka and Yokohama highly anticipated as one of the three.
Genting Singapore is currently one of the registered companies in Osaka and Yokohama.
While the group has managed to raise 20 billion Japanese yen of Samurai Bond last October and demonstrates keen interest in the new market, Kenanga Research reckons that it is still too early now to gauge on the potential outcome of the bidding process.
The group is also expected to face some stiff comeptition going forward as its mass market is facing stronger competition from regional players with several openings of new casinos in the Indochina region.
“We nevertheless believe that this could be a blip, as the shift in demand could be due to novelty effect and could normalize in the coming quarters,” Affin Hwang Capital commented.
The group’s VIP business however continued to flourish as it was driven by the availability of credits and improved slightly to 50 per cent from 49 per cent.
“Meanwhile, management maintained its less pessimistic tone over the Singaporean market while business volume has seen improvement in the past 1.5 years and should be sustainable,” added Kenanga Research.
All factors considered, Kenanga Research is maintaining their ‘outperform’ call on Genting for now with an unchanged target price (TP) of RM10.85.
Similarly, AffinHwang Capital is maintaining their ‘Buy’ call with an unchanged target price of RM12.80.