SINGAPORE (July 31): UOB Kay Hian is keeping its “hold” call on Genting Singapore (GENS) with an unchanged target price of $1.15 on the back of expectations of an unexciting second half in 2017.
“We expect GENS’ 2H17 earnings growth to flatline after experiencing strong recoveries in the past two quarters,” says UOB lead analyst Vincent Khoo in a report on July 27.
According to Khoo, GENS’ gaming volume should remain soft, even as impairment of receivables has largely normalised. In addition, there is now less room for the integrated resort and casino operator to surprise on operational cost savings.
Khoo’s call comes on the heels of a “surprising” rebound in VIP gaming volume for GENS’ competitor Marina Bay Sands (MBS) in the second quarter.
Las Vegas Sands in 2Q reported a 37.8% surge in MBS’ core adjusted EBITDA to US$492 million ($668 million) on the back of a recovery in VIP gaming volume as well as luck factor.
However, Khoo is keeping the industry outlook at “market weight” despite MBS’ surprising growth in VIP gaming volume.
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“We continue to expect an unexciting low single-digit industry volume growth in 2017 as the mass market segment remains flatlined,” says Khoo.
In addition, Khoo opines that industry-level growth in the VIP segment is likely to remain modest on the back of a “much more subdued VIP volume recovery at GENS” due to its cautious stand on credit extension to VIPs.
While Genting Singapore is positive on the development progress of the establishment of casino gaming industry in Japan, Khoo says any positive share price momentum will only happen in the intermediate term, nearer to the request for proposals (RFP) submission for Japan’s integrated resort.
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“Japan serves more as a long-term catalyst as the selection of integrated resort operators should only take place by 2019 followed by the opening of the IR in 2022-23,” says Khoo.
As at 12.06pm, shares of Genting Singapore are trading half a cent higher at $1.16.
