Maybank downgrades Genting Singapore to Hold

Saturday 25th of April 2015

Maybank Kim Eng has downgraded its rating for Genting Singapore from Buy to Hold following the company’s share price rallying 13 percent since March and on the possibility the company lost some of its VIP clients to rival Marina Bay sands.

The research company said MBS, whose first quarter EBITDA dipped 5 percent to $415.3 million YoY, saw flat quarter-on-quarter VIP volume compared to Macau’s which dropped 28 percent in this period.

Maybank attributes the VIP results to a 5 basis point increase in MBS’ rebate rate to 1.33 percent, which attracted more VIPs while Genting looks to extend less credit to improve its debt situation

“If Singapore’s VIP volume tracked Macau’s, RWS may have ceded VIP volume share.”

GENS did guide for lower RWS VIP volume as it is extending less credit to improve bad-debt management. Recall that RWS had record SGD82m bad debts in 4Q14. Still, we find it encouraging that MBS’s 1Q15 mass-market GGR continued to grow YoY.”

Maybank added that based on RWS’ performance, it predicts Genting Singapore to report first quarter EBITDA of SGD 275 million ($206 million)

“Assuming RWS’s share of VIP volume dropped from 54% in 4Q14 to 50% in 1Q15 and its share of mass-market GGR stayed at 42% with a normalised VIP win rate of 2.85%, we expect GENS to report 1Q15 EBITDA of SGD275m, down 31% YoY but up 45% QoQ," Maybank said, adding that the new Hotel Jurong will pick up the financial slack.

"This would imply 2015 EBITDA of SGD1.1b, a tad below our current SGD1.2b. We think the slight shortfall will be met by Genting Hotel Jurong, opening on 30 Apr 2015".