Genting Bhd - GENS’ 2Q12 results broadly in line

Period  2Q12 for Genting Singapore plc (GENS)

Actual vs. Expectations The 2Q12 adjusted EBITDA of SGD687.4m came in broadly in line with our expectation and accounted for 46% of our FY12 full year estimates (41% of the market consensus).

The 2Q12 net profit of SGD377.0m accounted for 41% of the market consensus’ full year estimate.

Dividends           No dividend was declared as expected.

Key Results Highlights  2Q12 net profit plunged 32% QoQ, hit mainly by higher expenses arising from the pre-opening of West Zone (to be opened by year end), while revenue dipped 3% over the quarter as gaming revenue slid 4% on lower business volume. Non-gaming revenue inched up slightly by 1% QoQ.

YoY, 2Q12 revenue contracted 11% while net profit declined 22% from a year ago.

Luck was better in the VIP segment as 2Q12 rolling chip win dropped by 3.1% from 3.4% in 1Q12. (2.7% in 2Q11) However, its market share for rolling chip volume dropped for the first time in three quarters to 48% in 2Q12 from 49% in the preceding quarter. (52% in 2Q11)

Daily average visits to the theme park improved QoQ to 9,560 in 2Q12 from 8,400 but was lower than that of 10,300 in 1Q11. ARPU dropped slightly QoQ to SGD86 in 2Q12 vs. SGD88 in 1Q12 and SGD83 a year ago The hotel occupancy improved to 92% in 2Q12 from 86% in 1Q12 and 88% in 2Q11, despite an 8% increase in room inventory over the period.

The average hotel room rate continued to hit new high at SGD432 in 2Q12 vs. SGD338 in 1Q12 and SGD317 in 2Q11

Outlook               The pre-opening cost for West Zone is expected to be repeated in 2H12. But once it is completed, i.e. the entire resort will be fully operational, earnings will improve further.

Change to Forecasts       No changes to our FY12-FY14 EBITDA estimatesfor GENS.

Rating   NOT RATED for GENS, OUTPERFORM for GENTING.

Valuation            We are keeping our TP on GENTING unchanged at RM11.69/share based on a 10% discount to its SOP while awaiting its results to be released later this month.

Risks      Risks to GENS include weaker than expected 1) business volume and 2) luck factor.

Source: Kenanga