Genting Singapore (GENS), a 52.7% subsidiary of Genting Bhd (GENT), reported a net profit of S$75.2m for FY15, down by 86% YoY. Adjusting for fair value loss, forex gain and loss/impairment on disposal of financial assets, FY15 core net profit stood at S$334.7m (-21.2% YoY). The decline in full-year core net profit was largely due to higher bad debt provision, unfavourable win percentage and lower VIP gaming revenue. The results were above market expectation mainly due to lower bad debt provision in 4Q15 but in line with our estimates. For FY16F, we expect GENS to contribute to about 45% of the group’s EBITDA. We maintain our Outperform rating on Genting with a SOTP-based TP of RM9.22.
4Q15 gaming revenue continued to fall but non-gaming was flattish. For 4Q15, gaming revenue fell by 19% YoY due to the conscious effort to scale down the VIP business. The decrease in revenue was partially mitigated by lower operating cost and overhead expenses. Meanwhile, Universal Studio registered a strong performance with tourist arrival hitting a record of 1.2m for the quarter. Nevertheless, non-gaming revenue was slightly lower, -1.7% YoY.
Smaller decline in adjusted EBITDA due to lower bad debt provision. Only S$45.3m of impairment of trade receivables was made in 4Q15, compared to S$92.5m and S$81.9m in 3Q15 and 4Q14 respectively. Although bad debt provision has improved, we believe GENS would continue to make further impairment losses until 2Q16. Going forward, the company would focus on growing the premium mass and mass business while the VIP business would be reduced. During the quarter, GENS has disposed almost all of its remaining portfolio investments.
Maintain Outperform. Although GENT share price has risen by about 16% year-to-date, our TP still suggest an upside potential of 12.4%. As such, we maintain our Outperform call on the stock. We believe the catalyst for GENT would be better performance for the plantation arm owing to higher CPO price in 2016 and a gradual recovery of business volume for its integrated resort operations.
Source: PublicInvest Research - 19 Feb 2016
http://klse.i3investor.com/blogs/PublicInvest/91497.jsp
