This article first appeared in The Edge Financial Daily on February 27, 2018
Genting Bhd
(Feb 26, RM8.92)
Maintain outperform with an unchanged target price (TP) of RM11.50: Genting Singapore, a 52.7% subsidiary of Genting Bhd, reported a net profit of S$601 million (RM1.78 billion) for financial year 2017 (FY17), compared with S$266.3 million a year ago. Stripping out exceptional and non-operating items, core earnings stood at S$639.5 million, jumping 129% year-on-year (y-o-y) mainly due to lower impairment on receivables. At adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) level, the results were in line with estimates. At this juncture, we maintain our earnings forecasts and sum-of-parts-based TP of RM11.50 for Genting pending release of its final quarter results on Feb 27. We retain our “outperform” call on Genting.
Both gaming and non-gaming revenues improved by 5% and 2% respectively as a result of higher business volumes. The daily average visitation for its major attractions — Universal Studios, the SEA Aquarium and Adventure Cove Waterpark enjoyed growth of between 6% and 9%. Adjusted Ebitda rose 9% on the back of lower impairment on receivables.
Genting has recalibrated its credit policy and commission structure for the very important person (VIP) gaming business. As a result, significant improvement is seen in terms of a substantial drop in impairment on gaming receivables. In 4QFY17, impairment was under S$5 million compared with S$38.9 million in 4QFY16 (FY17 was only S$48.3 million versus S$235.1 million in FY16). Operating margin has also improved, resulting in a sharp improvement in net profit.
In the medium to long term, catalysts for Genting include Genting’s possible venture into the Japanese gaming market, expansion of Resorts World New York and the completion of an integrated resort in Las Vegas. Meanwhile, the performance of its gaming operations in Singapore should remain “positive”, underpinned by stronger VIP and premium mass business volume. — PublicInvest Research, Feb 26