GENTING SINGAPORE: BIG MOVE BUT WE STILL LIKE IT

Strong quarter drives stock price in and out of the quarter.  Improving fundamentals, strong cash flow, and potential new markets keep us excited.

We think Q4 was the first of many solid quarters from Genting Singapore.  So even though the stock is up 20% since we turned bullish following our trip there in December, we remain positive.  The company is building a warship of cash as capex subsides, earnings are stabilizing, and the promise of new Asian markets may move to the forefront in the coming months.

While Genting Singapore’s EBITDA missed our estimate primarily due to hold, gaming volumes were better than expected.  Mass and slot revenue exceeded estimates.  VIP RC volume grew 56% vs. our estimate of 35% growth but hold was below the company’s historical average of 3.19%, so on the margin, gross VIP revenues were only 5% ahead of our estimate.  Better GGR was offset by higher rebates, GST, gaming points, comps/MVP's & other which rose to 37% of GGR from under 34% the in 2Q and 3Q12.

4Q12 Detail:

  • Gross gaming revenue of S$998MM on net gaming revenue of S$627MM
    • Rebates, GST & mass marketing points of S$371MM; equal to 37.2% of GGR , a large increase from 3Q12 at 33.7% and 27.7% in 4Q11
    • Gross VIP revenue of S$363MM and net VIP revenue of S$190MM
      • Just to clarify, when the Company says that Net RC revenues are 28% of Net Casino revenue, they are not just referring to the rebate on VIP but ALL discounts offered on gaming play (ie, Rebates, Mass points, GST, comps, MVP’s and other).
      • 56% of GGR
      • RC turnover: S$18.6BN up 56% YoY (51% market share)
      • Hold rate: 3.0%
    • Mass win of S$285MM up 2% YoY and flat QoQ
      • Drop of S$1.19BN and hold of 24%
  • Slot & ETG win S$155MM
    • Handle up 2.5% YoY to S$2.98BN
  • Non-gaming revenues were a little better than we estimated
    • We estimate that the Marine Life Park contributed $7MM of revenues to the quarter
      • $29 ticket pricing, but the actual price is closer to $23 due to the number of package deals being sold.
  • Expenses:
    • Gaming tax: S$88.6MM
    • Bad debt charge: S$43MM or 7.7% of Gross VIP which was in-line with the 2012 average but up YoY
    • Estimated fixed costs: S$206MM up from S$169MM in 3Q12 and S$195MM in 4Q11