Phillip on the Ground: Genting Singapore 2Q19 Results Briefing August 5, 2019 350

Here are some key highlights from the 2Q19 Genting Singapore Results Briefing: 

  1. 2Q19 results: Results were supported by a favourable rolling win percentage (so-called luck factor) in the VIP business. The rolling win was 3.7% (against the theoretical 2.85% win rate) compared to the 2.6% rolling win in 2Q18.  [Our back of envelope estimate is incremental S$75mn against theoretical win].

 

  1. VIP: Chinese VIP is down but made up from higher SE Asia VIP customers. LVS rolling volume was US$7.2b in 2Q19 and with 53% market share, GENS rolling volume was US$6.4b.

 

  1. Mass: The levy had a significant impact this quarter and GENS is waiting to see the full implications The entry levy increased on April 4, 2019 by 50% to S$150 daily, or S$3,000 annually.

 

  1. Japan: GENS has officially submitted a request for concept with Osaka prefecture. The national guidelines and formation of a gaming board will be submitted at the Autumn Diet session. Once approved, it will be published and cities can issue their request for proposal (RFP). If cities issue their request for proposal in November/December 2019, then January/Feb 2020 the RFP bid will close. The city can select the winning integrated resort operator by 2Q20. This is the earliest for the whole process. No interest to bid in Hokkaido. The situation in Yokohama is less clear.

 

  1. Bad Debts: VIP rolling volume is significant and should be prudent in provision. The higher provision is not a reflection of actual poor repayment. Because the luck factor very high and may affect the payment schedule. GENS will take a more prudent view.

 

  1. Accelerated Depreciation:  Due to the new expansion plans under RWS 2.0, some areas require to be demolished and rebuilt. GENS identified a number of those areas and those were hit by accelerated depreciation as a prudent measure. For instance, the Resorts World Theatre will be refurbished;

 

  1. RWS 2.0: Start construction by mid-20. The construction cost will spread out from mid-20 to 2024. Until GENS receives more detailed drawings and submission to authorities, it is premature to provide a construction schedule. Payment for the land should be by year-end.

 

Comment

Despite the better than expected results management was very cautious. Stock is more a wait and see from our perspective. Revenue growth has hit maturity apart from the volatile luck factor. If cheap enough, the stock is worth considering. Using dividend yield could be the entry point. The company has strong enough balance sheet to support current dividends and there is under-priced optionality in securing a Japan casino license.

 

# Phillip Securities Research does not have any research coverage or recommendation on Genting Singapore.

 

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Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

Paul has almost 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.

He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.

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