Wednesday, September 25, 2013

Genting Singapore : Stock is now pricing in more realistic earnings estimates at undemanding valuations (Nomura)

Genting Singapore
Target price Increased from 1.23 SGD 1.52
Closing price September 20, 2013 SGD 1.45
Stock is now pricing in more realistic earnings estimates at undemanding valuations

Action: Upgrade to Neutral; Street expectations more realistic
Following a 40% cut in street FY13F EBITDA estimates since 2012, we feel that our revised FY13/14F EBITDA estimates of S$1.26bn/1.4bn are a much more realistic assessment of Singapore’s baseline gaming revenue potential, taking into account a volatile win % and seasonal fluctuations. With Singapore tourist arrivals moderating to single digits (YTD arrivals up 8% y-y), and this being reflected in Sentosa traffic, we forecast a mid-high single digit growth in RWS’s top-line. We argue that our and consensus earnings have limited downside risks now, and this should support the share price at current levels. We tweak our FY13F/14F EBITDA estimates by -7%/+5% to build in a weak performance in 1Q13F due to a lower win rate. However, we now value GENS at mid-cycle, as we no longer see a reason for it to trade at a discount given limited earnings downside. We raise GENS to Neutral, with a TP of S$1.52/share (5% upside).

Valuation: Target 12.5x adj FY14F EV/EBITDA, historical average
Following a transfer of coverage, we ascribe a 12.5x adj multiple to FY14F EBITDA to value GENS, which is its historical average. This implies a 25% discount to Macau-listed names’ average multiple. Macau stocks have seen a re-rating driven by mass market volumes, which are unlikely to occur in Singapore, and are additionally supported by better yields, RoE.

Catalysts: Upside possible through overseas ventures (eg Japan)
With Singapore’s market maturing, upside in GENS’s earnings is possible either through a sharp upswing in VIP volumes / win rate (difficult to forecast) or a deployment of its huge cash balance in overseas ventures, like Japan, where there are uncertainties on timing and competition.

Source/Extract/Excerpts/来源/转贴/摘录: Nomura-Research,
Publish date: 24/09/13

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