KUALA LUMPUR (Aug 5): The outlook for Genting Bhd's (GENT) subsidiary Genting Singapore Ltd (GENS) is likely to be less rosy as global economic conditions remain weak and as tensions between the US and China heighten, said Affin Hwang Capital.
This is despite the subsidiary having reported a decent set of numbers for the first half of 2019 (1H19), with core profit after tax and minority interest (PATAMI) of S$373.8 million (-7.3% y-o-y), broadly in line with house and consensus estimates, delivering 47% and 52% of 2019 forecast respectively, said Affin Hwang.
For the second quarter (2Q), however, core PATAMI only grew by 2% — although revenue grew by 14% y-o-y — due to the higher impairments on its receivables and accelerated depreciation on some of its assets.
In a note today, Affin Hwang said management guided that its underlying mass market business experienced a significant drop in volume during the quarter, which it attributed to the 50% hike in entry levy and the slowing local economy.
"We concur with management's view that local punters will likely get used to the new levy, however the overall mass gaming volume is still likely to remain weak due to the challenging economic outlook both locally and regionally. We believe that the opening and expansion of some regional casinos will steal some of GENS' both premium mass and VIPs," it said.
For GENT, Affin Hwang maintains its buy call on the stock with an unchanged target price of RM9.
Meanwhile for GENS, Hong Leong Investment Bank (HLIB) said it maintained its buy call with an unchanged target price of S$1.17.
On the Japan Integrated Resort (IR), HLIB said management had guided that there is no concrete indication as to when the request for proposal (RFP) will be issued.
GENS has already submitted the documents required for the stage 1 of request for concept (RFC) to the city officials in Osaka.
"By taking a best case scenario whereby assuming the cities issue the RFP sometime in end-2019, a winner can be chosen by 2Q20. In addition, management appears to show little interest in trying out for the IR in Yokohama and Hokkaido," said HLIB.