Genting Singapore released its Q3 results which analysts at Maybank Investment Bank say missed their expectations on a combination of lower-than-expected VIP volume and mass market gross gaming revenue coupled with higher-than-expected bad debts.
The house cut is core net profit estimates by 16-17% and DCF-TP by 8% to SGD1.01. however maintains its BUY call. At its
current share price, the market is discounting its 'RWS 2.0' investments that will increase its appeal and earnings in the long term, in its view. The house also expects GENS to jointly bid for a Thai casino license next year.
Results came in below expectations
3Q24 core net profit of SGD91m (-58% YoY, -18% QoQ) brought 9M24 core net profit to SGD450m (-11% YoY) or 63% o FY estimate. As a secondary check, 9M24 EBITDA of SGD735m (-8% YoY) also underperformed at 68% of FY estimate. On closer inspection, the shortfall was largely due to 9M24 VIP volume of SGD26b (+8% YoY) coming at 66% of FY estimate
and higher-than-expected bad debts, Maybank said
VIP and mass markets a tad weaker-than-expected
Notably, GENS did warn that VIP volumes may soften due to the uncertain Chinese economy. 3Q24 VIP volume eased 2% QoQ to SGD7.7b but are not overly concerned as the VIP market yields low EBITDA margins (c.20%). That said, the house notes that the higher EBITDA margin yielding 3Q24 mass market gross gaming revenue (c.60%) eased 6% QoQ despite visitor arrivals peaking in the 3Q. GENS attributed this to fewer premium mass gamblers due to the full closure of the 364 room Hard Rock Hotel, which will reopen in 1Q25.
Cut core net profit estimates by 16-17%
Maybank expects 4Q24 VIP win rate normalized EBITDA to be flattish QoQ (c.SGD225m) as seasonally lower visitor arrivals is moderated by lower bad debts as GENS tightens its credit policy. The house forecasts lower VIP volume, lower mass market gross gaming revenue, and more bad debts to cut FY24E/FY25E/FY26E EBITDA by 11%/12%/12% and FY24E/FY25E/FY26E
core net profit by 16%/17%/17%. Consequently, trimming its DCF-TP to SGD1.01 from SGD1.10.
