GENTING: Q4 SHOULD BE A SOLID ONE

We got that good feeling about Genting during our trip to Singapore in mid-December, and the company’s Q4 earnings release should prove that out.

 

 

On December 12th, we summarized our thoughts on Genting in a note to top accounts “GENTING SINGAPORE LOOKING INTERESTING.”  At the time, we thought that improved earnings visibility, market stability, and low expectations could line up to produce a beat and solid commentary during the company’s Q4 release and conference call. 

 

Since December 12th, Genting Singapore has rallied 23% but a very good quarter could sustain the recent momentum.  A cash heavy balance sheet and significant cash flow generation and budding opportunities in South Korea and Japan provide a nice longer term thesis to compliment the improving earnings picture.   

 

Our confidence on the quarter is partly predicated on our proprietary analysis of Singapore betting tax data and Marina Bay Sands results.  4Q Singapore GGR looks like it will be down 4-6% YoY and up double digits sequentially.  Despite 45% YoY volume growth in their VIP RC business, MBS’s dismal luck led to an 8% YoY decline in GGR in the December quarter, which implies that RWS got a bigger piece of the pie.

 

We estimate that Resorts World Sentosa will report net revenue of S$795MM and EBITDA of S$399MM, 11% and 13% ahead of implied consensus, respectively

 

 

4Q DETAIL:

  • Gaming revenue, net of commissions of S$636M
    • Gross VIP revenue of S$531MM and net revenue of $296MM
      • We expect RC volume to increase YoY to S$16.1BN
        • This would equate to market share of 44% - equivalent with RWS’s lowest share in 3Q11.  Their share last quarter was 47%.
      • Hold of 3.3%
      • Rebate of 1.33%
    • Gross Mass table of S$278MM and S$238MM net of gaming points
      • Drop of $1.2BN, down 4% YoY
        • Market share of 47%, flat QoQ
      • Gaming points equal to 3.3% of drop or S$40MM
    • $148MM of slot and EGT win
      • S$2.9BN handle or 47% market share; flat QoQ
  • Net non-gaming revenue of S$159MM
    • Hotel room revenue of S$58MM
    • S$35MM of F&B and other revenue
    • USS revenue of S$86MM
  • Gaming taxes of S$85MM
  • Implied fixed costs of S$210MM

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