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The analyst reports from various companies
Maybank Kim Eng: TP $1.7, rating HOLD
Downgrade to HOLD with new TP of SGD1.70. At 12.7x 1-year forward EV/EBITDA, GENS is trading at par to the Macau casino sector mean. We prefer 52% shareholder, Genting (GENT MK, BUY, TP: MYR11.50) for its cheaper valuations of 16x FY13 PER.
GENS reported disappointing 1Q13 results due to a poor VIP win rate of 2.12%. Although 1Q13 VIP volume surged 38% YoY, this momentum may not last.
We raise our earnings estimates by 2-3% on higher FY13 VIP volume growth forecast of 20% (10% previously) and EV/EBITDA based TP by 2% to SGD1.70 but with only 6% upside currently, we downgrade GENS to HOLD from Buy.
http://remisiers.org/cms_images/research...052013.pdf
OCBC Investment Research, TP $1.41, rating SELL
Genting Singapore: 2013 outlook more
cautious
● Much lower win percentage
● More cautious 2013 outlook
● SELL with new S$1.41 FV
http://remisiers.org/cms_images/research...03-OIR.pdf
Phillip Security, TP $1.40, rating NEUTRAL
Genting – Results (Ken Ang)
Recommendation: Neutral
Previous close: S$1.61
Fair value: S$1.40
1Q13 NPAT S$115.9 million, EBITDA S$290.5 million
Record high VIP rolling volume, but win rate low.
Mgmt guides uncertain outlook in China, MY, SG
Focus on opening another leisure centre in Japan
Maintain “Neutral”, based on 13X EV/EBITDA, with new TP of S$1.40.
http://remisiers.org/cms_images/research...050313.pdf
CityFarmer,
That's what I like about you... so hardworking...
Some comments to add to my previous post,
1. Genting's casino license is renewal in 3 years' time commencing 6-Feb-13 (
SGX Annc). I suppose in 3 years' time, we'll see a special situation where the share price may weaken on this uncertainty of license renewal.
2. Using FY EPS = 4.81ct, PE = 30.87 @ $1.485 (Friday close). I was expecting Q113 results to show a recovery in their earnings, projecting it to be 5~10% for the year and was therefore previously willing to buy at such high PE for this potential 'Growth' recovery story. But, with Q113 EPS = 0.95ct, the PE (using latest 4Qs) = 36.4. It's also not a Yield play as Div = 1ct ie. Yield = 0.673%
3. The huge Cash = ~$4Bil is a double-edged sword. Altho' it puts them in a good position to take advantage of any new opportunities eg. Japan casino liberalisation, take note that it was raised from their Perpetual issues ie. they have to continue paying interest on it, even as it sits idling in the bank earning tiny returns.
4. Genting is widely covered by many analysts. The daily trading volume is very huge. The nos. of Short Selling is also very large. This can only mean that there's a very good degree of Price Efficiency. Any price inefficiency will likely be corrected within a very short span of time.
5. I wonder about the relationship pertaining to the strategies between Genting Bhd, Genting Singapore and Genting HK. For that adventure into Australia to disturb Crown casino, all 3 were involved. But, for the US adventure, looks like only Genting Bhd.
The above is not meant to dampen any interest in Genting but rather, to be sure to keep your eyes open if you intend to get vested.
Goldman keeps buy on Genting; lowers target price to S$1.67/shr
Goldman Sachs on Friday kept a buy call on Genting Singapore but lowered its 12-month target price to S$1.67 a share, down from S$1.71 previously following the casino operator's shockingly weak first quarter results yesterday.
The US research house noted Genting-owned Resorts World Sentosa (RWS), one of the two integrated resorts in Singapore, saw record high VIP rolling volume, but recorded its weakest ever win rate of 2.12 per cent.
Goldman also noted that Genting's management was more guarded on prospects for the next six months, on softer China macro, a reversal from an upbeat 12-month guidance in the fourth quarter.
"Management is focused on growing foreign mass to offset a saturated local mass," it said.
(05-05-2013, 10:46 AM)KopiKat Wrote: [ -> ]CityFarmer,
That's what I like about you... so hardworking...
Some comments to add to my previous post,
1. Genting's casino license is renewal in 3 years' time commencing 6-Feb-13 (SGX Annc). I suppose in 3 years' time, we'll see a special situation where the share price may weaken on this uncertainty of license renewal.
2. Using FY EPS = 4.81ct, PE = 30.87 @ $1.485 (Friday close). I was expecting Q113 results to show a recovery in their earnings, projecting it to be 5~10% for the year and was therefore previously willing to buy at such high PE for this potential 'Growth' recovery story. But, with Q113 EPS = 0.95ct, the PE (using latest 4Qs) = 36.4. It's also not a Yield play as Div = 1ct ie. Yield = 0.673%
3. The huge Cash = ~$4Bil is a double-edged sword. Altho' it puts them in a good position to take advantage of any new opportunities eg. Japan casino liberalisation, take note that it was raised from their Perpetual issues ie. they have to continue paying interest on it, even as it sits idling in the bank earning tiny returns.
4. Genting is widely covered by many analysts. The daily trading volume is very huge. The nos. of Short Selling is also very large. This can only mean that there's a very good degree of Price Efficiency. Any price inefficiency will likely be corrected within a very short span of time.
5. I wonder about the relationship pertaining to the strategies between Genting Bhd, Genting Singapore and Genting HK. For that adventure into Australia to disturb Crown casino, all 3 were involved. But, for the US adventure, looks like only Genting Bhd.
The above is not meant to dampen any interest in Genting but rather, to be sure to keep your eyes open if you intend to get vested.
"That's what I like about you... so hardworking... "
Hardworking is the "compensation" for my lackings of insight and smartness. My special recipe to win and profitable
“不辛苦怎得世间财“ - no money without work hard, pardon me for the sloppy translation.
Good summary of the company. Thanks.
Extracts from AmFraser report (from
remisiers.org),
Hurt by low win rate
- Genting Singapore PLC’s (GenS) annualised 1QFY13 results were below consensus expectations and our forecasts. Excluding a fair value gain adjustment, GenS’ net profit would have declined 53% YoY to S$96.6mil in 1QFY13.
- In spite of the weak results in 1QFY13, we are keeping our earnings forecast in anticipation of improved luck factor and margins in 2HFY13.
- Revenue of the gaming division fell 20.5% YoY to S$521.2mil in 1QFY13 while adjusted group EBITDA shrank 34.5% to S$249.7mil. EBITDA margin was a low 38.2% in 1QFY13 versus 49.5% in 1QFY12.
- GenS was dragged by a lower win percentage in the VIP segment, which slid from 3% in 4QFY12 to 2.12% in 1QFY13. This was in spite of an estimated 14% QoQ surge in the VIP volume of business in 1QFY13, which was higher than Marina Bay Sands’ 10.6% increase.
- We understand that GenS’ EBITDA (for integrated resort segment) would have been S$400mil in 1QFY13 compared with the reported S$255.4mil if the win percentage in the VIP segment were to have normalised at 2.85%.
- Impairments of trade receivables were stable at S$45.2mil in 1QFY13 versus S$43.2mil in 4QFY12. Trade debtors inched up from S$959.5mil in 4QFY12 to S$968.7mil in 1QFY13, which implies that credit extension was not aggressive in 1QFY13.
- Compared to the previous conference call, management was more cautious this time around. China’s weak economic growth coupled with a slowdown in credit extension are expected to affect GenS’ turnover growth. A significant number of GenS’ VIP players are from mainland China.
- The bidding process for the casinos in Japan might take place in two years’ time. The casino promotional bill is expected to be approved by October or November 2013. Thereafter, it would take about 12 months for the Japanese lawmakers to decide on the prefectures, which would have the casinos.
- There is likelihood that GenS would be writing-off some of its trade receivables this year. The new Casino Control Act has permitted the write-offs of trade receivables. Previously, GenS had to apply to the authorities for any write-off of receivables.
My Comments
The 'Low Win Rate' point set me thinking... Is this purely a luck thing? ie. Genting casino VIPs are getting luckier? Or is this something that's also dependent on the skills of their Dealers / Croupiers? Hmm... it looks like chances of winning for VIPs is higher at Genting compared to Sands! After a couple of quarters of 'Low Win Rate', it'd appear that more VIPs are becoming aware? That's why their surge in VIPs is more than Sands? Hmm...
As for the Japan casino, AmFraser analysts estimated that it'd take another 2 years for any bidding to take place.
Yes, the games are designed in such a way that the house always win in the long term. In other words, the house has the statistical favor on them. This is why casinos always provide free food and coffee. They have bright lights which will never make you know what's the time outside. Free deals such as one night free hotel stay are often given out to the casino guests. They do so simply to entice patrons to spend more time and the casinos, play more game and eventually let the house win.
Of course it may not always be statistical beneficial for casinos as there is still always a certain level of confidence interval for success. Hence, casinos can be unlucky but the probability of it being consistently 'unlucky' is low and a reversion of mean is likely to happen for such statistical-driven business model.
That said, what's troubling about GENS is not the 'unlucky' factor but it's more of a structural one. There is only so much a novelty effect can last. In other words, the locals can never support the casino industry alone. You need junkets to bring in more VIPs. It is the high net worth segment where casinos earn the most. However, we are seeing this lacking in the Singapore environment. Regulations are too stringent and there are just too many paper works needed to be done. The big guys - Macau junkets - aren't that 'clean', hence it is going to be hard for them to be granted the IMA licenses. The last time I check, there were only 3 licensed junkets and the license agreements have to be renewed annually.
Yup, until now only Malaysian junkets license are issued. They don't seem to provide much help to protect Genting's credit risk. From the recent quarter report, the receivables still stand at $900m. About $600m is gaming debt, with debt exceeding 6 months at around $250m.
Genting needs Chinese junket to reduce their risk. I believe the delay has more to do with international relationship, rather than stringent regulation. Junkets by nature are debt collectors, their job won't be easy if they are too "nice".
The mass market revenue is quite stagnant. Genting is building a hotel in Jurong to cater for this crowd. And hoping that new tourist arrival will bring some growth.
I guess the recent surge in share price has more to do with positive outlook on Japan casino. But the result only only be known in about 1 year, then follow by 3 years of construction.
IMO, it is a tough call for GENS.
The bulls are hoping for the Japan casinos expansion which is really akin to just buying a 'hope' and praying for the catalyst to happen. For now, I see no convincing evidence of a possible and clear overseas expansion. Till then, it is really speculating on its growth. The bears are touting that local casino scene is dead without any growth in junket operation. It is indeed true but that being said, GENS is sitting on a hoard of cash and though prospect is weak, the casino business isn't one that is clearly flawed in its structure.
yeah, buying hope will be expensive for sure
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