Singapore | Hotels, Restaurants & Leisure

Asia Pacific Equity Research

GENTING SINGAPORE | HOLD MARKET CAP: USD 9.3B

25 Feb 2015 Company Update

AVG DAILY TURNOVER: USD 15M

HOLD (maintain)

EXPECTS VIP VOLUME TO REMAIN WEAK   

Fair value

4Q NPAT hit by lower win rate 2015 outlook remains challenging Value emerging around S$0.95 or better

S$1.03

add: 12m dividend forecast

S$0.020

versus: Current price

S$1.045

12m total return forecast

Poorer 4Q14 showing Genting Singapore (GS) reported a poorer-than-expected set of 4Q14 results last night, with revenue down 8% YoY (-1% QoQ) at S$637.9m, still hit by the slide in China inbound visitors (gaming revenue down 9% YoY and 3% QoQ; non-gaming fell 4% YoY but +5% QoQ). Again, due to a lower-than-expected win rate of 2.2% (versus the 2.85% theoretical hold rate for its VIP business), adjusted EBITDA slipped 24% YoY and QoQ to S$194.6m. As a result, reported NPAT fell 36% YoY and 8% QoQ to S$89.2m. For the full-year, revenue inched up 1% to S$2862.5m, but was 5% below our forecast, while reported NPAT slipped 12% to S$517.3m, nearly 10% below our estimate. GS declared a final dividend of S$0.01/share, unchanged from last year. Expects VIP volumes to remain weak Going forward, GS foresees significant challenges for the Asian gaming and tourism industry, which continues to be impacted by the developments in China (slower economic growth, anti-graft drive etc). While GS expects bad debt provisions to remain relatively high in the near term, it believes that these will start to normalize due to its more prudent credit policy. And to make up for the likely weak VIP volumes, GS says it will continue to target the mass premium market, focusing on visitors in the surrounding region. And with the 550-room Jurong Hotel slated for a soft opening in Apr (full launch in Jun), GS is hopeful that it can attract as much as 1.5k additional daily visitors to its IR this year.

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Analysts Carey Wong (Lead) ● +65 6531 9808 [email protected] Wong Teck Ching (Andy)CFA ● +65 6531 9817 [email protected] Key information Market cap. (m)

S$12,634 / USD9,306

Avg daily turnover (m)

S$20 / USD15

Avg daily vol. (m)

17.2

52-wk range (S$)

0.99 - 1.365

Free float (%)

47.3

Shares o/s. (m)

12,089.7

Exchange

SGX

BBRG ticker

GENS SP

Reuters ticker

GNTG.SI

ISIN code GICS Sector GICS Industry Top shareholder Relative total return

G13 Consumer Discretionary Hotels, Restaurants & Leisure Genting Bhd - 52.6% 1m

3m

12m

Company (%)

0

-8

-22

STI-adjusted (%)

0

-11

-36

Price performance chart

Maintain HOLD with new S$1.03 fair value In view of the latest results as well as the still muted outlook for the VIP segment, we opt to pare our FY15 estimates for revenue by 12% and NPAT by 23%, preferring to err on the side of caution. Having said that, our DCF-based fair value improves slightly from S$1.01 to S$1.03 as we include some contribution from its Jeju IR from FY17 onwards. Maintain HOLD and believe that value is emerging around S$0.95 or better. Sources: Bloomberg, OIR estimates

Key financial highlights Year Ended 31 Dec (S$m) Revenue EBITDA Fair Value Adj (Net) Net Profit EPS (S cents) Cons. EPS (S cents) Price/NTA (x) EV/EBITDA (x) Net Gearing (%) ROIC (%)

Industry-relative metrics FY13

FY14

FY15F

FY16F

2,847.3 1,159.5

2,862.5 1,371.6

2,827.5 1,094.5

2,820.5 1,085.2

104.9 589.4 4.8 na 1.3 9.8 -10.8 5.0

-136.1 517.3 4.2 na 1.3 7.9 -15.7 4.5

0.0 484.4 4.0 5.3 1.3 10.0 -14.4 4.2

0.0 482.8 3.9 5.8 1.3 10.0 -15.0 4.1 Note: Industry universe defined as companies under identical GICS classification listed on the same exchange. Sources: Bloomberg, OIR estimates

Please refer to important disclosures at the back of this document.

MCI (P) 004/06/2014

OCBC Investment Research Singapore Equities

Exhibit 1: Interim Results Year to 31 Dec (In S$m) Revenue Gross profit EBITDA EBITDA margin Depreciation & amortisation Fair value adjustments (net) Impairment of intangible assets Net interest Forex Associates Exceptionals Pre-tax profit Tax Minority interests Perpetual Holders Net profit Net Margin

3Q13 692.9 210.3 383.7 55.4% -102.6 30.0 0.0 -12.4 33.5 1.5 0.0 190.3 -20.3 0.0 -29.7 140.3 20.3%

Exhibit 2: Genting’sAdjusted Property EBITDA and Margin

Source: Company, OIR

2

4Q14 637.9 151.2 182.7 28.6% -98.7 -145.6 0.0 -9.7 74.7 -1.6 153.0 154.7 -35.8 0.0 -29.7 89.2 14.0%

% YoY -7.9% -28.1% -52.4% -3.7% nm nm -21.7% 123.0% nm nm -18.7% 76.7% nm 0.0% -36.5%

3Q14 644.8 217.9 181.9 28.2% 0.0 -7.7 0.0 -9.7 0.0 -3.3 0.0 161.1 -34.0 0.0 -29.7 97.4 15.1%

% QoQ -1.1% -30.6% 0.4% nm 1788.2% nm 0.1% nm -51.4% nm -4.0% 5.4% nm 0.0% -8.4%

OCBC Investment Research Singapore Equities

Company financial highlights

Income statement Year Ended 31 Dec (S$m)

FY13

FY14

FY15F

FY16F

Revenue EBITDA Operating Profit Fair Value Adj (Net) Impairment of Intangibles Finance Expenses Associates Exceptionals Pre-tax Profit Net Profit

2,847.3 1,159.5 758.1 104.9 0.0 -54.0 36.6 0.0 845.5 589.4

2,862.5 1,371.6 972.4 -136.1 0.0 -42.1 10.6 0.0 804.8 517.3

2,827.5 1,094.5 763.4 0.0 0.0 -39.6 10.6 0.0 734.4 484.4

2,820.5 1,085.2 761.5 0.0 0.0 -39.6 10.6 0.0 732.5 482.8

FY13

FY14

FY15F

FY16F

3,630.2 2,568.5 6,094.6 139.4 13,074.1 930.9 2,218.2 277.7 9,647.2 13,074.1

3,697.5 2,607.3 5,809.1 119.0 12,672.2 1,024.0 1,702.4 242.5 9,703.3 12,672.2

3,452.6 2,499.2 5,478.0 119.0 12,954.9 1,134.4 1,584.5 231.8 10,004.2 12,954.9

3,576.5 2,496.6 5,154.3 119.0 13,252.5 1,132.7 1,584.5 231.8 10,303.6 13,252.5

Cash flow statement Year Ended 31 Dec (S$m)

FY13

FY14

FY15F

FY16F

Operating Profit Working Capital Changes Net Cash from Operations Capex Investing Cash flow Change in Equity Net Debt Change Financing Cash Flow Net Cash flow Ending Cash Balance

1,263.4 -261.8 820.5 -391.8 -799.7 1.5 -494.3 -778.5 -753.4 3,630.2

1,424.1 -357.9 955.6 -195.1 69.6 -169.4 -531.4 -982.1 67.3 3,697.5

1,062.3 219.3 1,192.3 -200.0 -1,096.2 0.0 -117.9 -340.9 -244.8 3,452.6

1,053.0 0.8 964.8 -200.0 -617.9 0.0 0.0 -223.1 123.9 3,576.5

Key rates & ratios

FY13

FY14

FY15F

FY16F

EPS (S cents) Core EPS (S cents) Core PER (x) Price/NTA (x) EV/EBITDA (x) Dividend Yield (%) ROIC (%) ROE (%) Net Gearing (%) PE to Growth (x)

4.8 5.1 20.6 1.3 9.8 1.4 5.0 6.1 -10.8 130.5

4.2 5.1 20.6 1.3 7.9 1.4 4.5 5.3 -15.7 -2.0

4.0 4.9 21.2 1.3 10.0 1.9 4.2 4.8 -14.4 -4.1

3.9 4.9 21.3 1.3 10.0 1.9 4.1 4.7 -15.0 -82.7

Balance sheet As at Dec 31 (S$m) Cash Other Current Assets Fixed Assets Intangible Assets Total Assets Current Liabilities less Debt Debt Other Long Term Liabilities Shareholders Equity Total Equity and Liabilities

Sources: Company, OIR forecasts

Company financial highlights

OCBC Investment Research Singapore Equities

SHAREHOLDING DECLARATION: The analyst/analysts who wrote this report holds/hold NIL shares in the above security.

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Carmen Lee Head of Research For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

Important disclosures

Published by OCBC Investment Research Pte Ltd