UOB Kay Hian is keeping its “buy” call on Genting Singapore (GENS) with a target price of $1.38 on expectations that its valuations will trend up over time. According to lead analyst Vincent Khoo, this will be supported by stable Singapore operations as well as GENS’s bid for Japan’s integrated resort (IR) concession as it builds up to the request for proposal (RFP) stage.
The positive note on GENS comes despite a 35% y-o-y plunge in VIP gaming volume at GENS’s casino-operator rival in Singapore, Marina Bay Sands (MBS). “On a constant currency basis, we estimate MBS’s rolling chip volume (RCV) continued its downtrend and dropped 35% y-o-y to $7.8 billion in 2Q18, the lowest since 3Q10,” says Khoo in a flash note on July 26. However, he expects VIP RCV growth at GENS’s Resorts World Sentosa (RWS) will outperform MBS’.
“RWS recorded positive quarterly growth in VIP RCV in 3Q17-1Q18 (after 12 consecutive quarters of y-o-y declines), in contrast with MBS’s RCV decline of 8-35% over the same period, thanks to RWS’ more relaxed credit policy,” says Khoo. “We expect RWS’s VIP volume to at least sustain in the near term. RWS’s RCV market share steadily increased from 2Q17’s 34% to 1Q18’s 49%,” he adds.
Meanwhile, UOB is maintaining its “overweight” stance on Singapore’s gaming sector, despite expecting only a flat or low single-digit growth in industry gross gaming revenue (GGR). “Japan’s legalisation integrated resorts has put the two Singapore casino operators as strong candidates in the IR bidding, given their experience in operating in a highly-regulated casino environment and track record in contributing to the country’s tourism,” Khoo says.
The analyst notes that GENS’s share price was on the uptrend from the RFP stage in 2006 until the opening of RWS in Feb 2010, before a sharp rise in its share price on the opening. As at 11.32am, shares of GENS are trading 1 cent lower at $1.27, implying an estimated price-to-earnings ratio of 18.4 times and a dividend yield of 2.3% for FY18.