Genting Singapore  


Don’t Get Overly Excited  

  
Don’t jump to conclusions.    Marina Bay Sands (MBS) recorded  
decent 4Q12 results driven by VIP volume growth, but the same may  
not necessarily be true of Genting Singapore (GENS). Recall that when  
MBS’ VIP volumes surged 35% QoQ in 3Q11, VIP volumes at Resorts  
World Sentosa (RWS) were flat QoQ. We maintain GENS’ estimates,  
HOLD call and SGD1.35 TP on 11x FY13 EV/EBITDA. While its share  
price reacted positively to the news of MBS’ earnings, investors may  
want to take profit ahead of its results on 21 Feb 2013.   
MBS’ 4Q12 earnings off an intra-year low. MBS reported 4Q12 net  
revenue of USD717.2m (+15% QoQ, -11% YoY) and EBITDA of  
USD302.5m (+16% QoQ, -29% YoY). The sequential improvement was  
driven by higher VIP volumes of    USD16.5b (+40% QoQ, +53% YoY)  
and a higher, albeit still below theoretical, VIP win rate of 2.14%  
(+35bps QoQ, -120bps YoY).      
High VIP volumes may not be sustainable. Although MBS’ 4Q12 VIP  
volumes were markedly higher QoQ and YoY, it said that VIP volumes  
are concentrated on only a few VIPs and will vacillate QoQ. We also  
note that its rebate rate of 1.31% of VIP volume was the highest since  
4Q10. Thus, RWS too may have raised its rebate rates in 4Q12 to  
defend its share of VIP volume, but at the expense of margins.  
Mass market segment still contracting. Conversely, MBS’ 4Q12  
mass market revenue of SGD1.1b was down 2% QoQ and 3% YoY  
(slot handles were up 3% QoQ    but down 2% YoY), likely reflecting a  
still-cautious outlook among mass market patrons around the region.  
Coupled with its below-theoretical VIP win rate of 2.14%, EBITDA  
margins remained suppressed at 42%.  
May not be positive for GENS. When MBS’ VIP volumes hit a similarly  
high level of USD16.7b (SGD20.5b) in 3Q11, RWS’ VIP volumes  
stayed flat QoQ at SGD16.1b (Chart 1) it therefore lost market share.  
MBS stated that this was because it hosted 25 VIPs unique to it who did  
not gamble there again. This corroborates its earlier statement that VIP  
volumes are highly volatile.    Hold(unchanged)
Share price: SGD1.55  


  


Target price: SGD1.35 (unchanged) (Maybank Kim Eng)