Driven by VIP GGR and tight cost controls, adjusted EBITDA surged 37% to $320.1 million during the quarter.
See: Genting Singapore posts 35% increase in 3Q earnings to $143.8 mil
“3Q17 adjusted EBITDA margin of 50.8% was the highest since 1Q12, and brought 9M17 adjusted EBITDA margin to 48.4%, closer to the levels seen in 2011/2012,” says CIMB Research lead analyst Cezzane See in a report on Monday.
CIMB is keeping its “add” rating on GENS and raising its target price to $1.45, from $1.35 previously.
See also: OCBC’s CEO change ‘earlier’ than expected; Citi stays ‘neutral’ with target price 6.8% under
This comes on the back of higher adjusted EBITDA forecasts for FY17-19F.
“We raise our adjusted FY17-19F EBITDA by 6.7-8% as we increase our gaming revenue given better VIP growth in FY17-19F,” says See. “Our changes consequently lead to FY17-19F EPS increasing by 13-16.4%.”
Maybank Kim Eng Research analyst Yin Shao Yang notes this was the first time quarterly VIP volume grew y-o-y since 2Q14, and the first time quarterly mass market GGR grew y-o-y since 1Q16.
See also: PhillipCapital initiates coverage on Frencken with ‘buy’ and TP of $1.76
“GENS attributed this to its new premium mass and slot gaming areas,” says Yin. “This is a positive development as 3Q16-2Q17 earnings growth y-o-y had been largely driven by cost savings.”
Maybank is maintaining its “buy” call on GENS with a higher target price of $1.42, from $1.35 previously, with EBITDA forecasts for FY17-19F raised by 4-5%.
“While naysayers may say that the higher-than-expected 3Q17 VIP volume was due to VIP volume share gains, note that 3Q17 industry VIP volume did grow by approximately 30% y-o-y,” says Yin. “This was driven by the recovering Macau VIP market ‘spilling over’ to the Singapore one.”
As at 11.54am, shares of Genting Singapore are trading 3 cents higher at $1.30. According to Maybank forecasts, this implies an estimated price-to-earnings ratio of 19.6 times and a dividend yield of 2.5% in FY18.
