Genting expects a seasonally strong 1Q

Deutsche Bank

DB expects S$370m EBITDA in 1Q; a seasonally strong quarter
Genting Singapore will be releasing 1Q results on May 2. We expect a seasonally good quarter, underpin by strong VIP rolling volume given Chinese New Year effect while mass market is likely to stay firm. Genting Singapore’s share price rallied 9% the last 1-week (vs STI's 1.7%) in anticipation of a strong Q as well as positive numbers from Macau peers. Genting Singapore currently trades at 12x 2013 EV/EBITDA, ahead of historical average of 11x vs Macau’s average of 13x.

DB expects 15% q/q growth in VIP rolling volume on CNY seasonality
We expect RWS’s 1Q VIP rolling volume to rebound strongly by c 15% q/q; 40% y/y given seasonality and low base effect. This should bring rolling close to its all time high of S$21.8bn in 4QFY10 and VIP GGR to be up 23% y/y or 15% q/q assuming 3% VIP hold. We expect mass GGR to remain firm, up 2- 3% y/y. Assuming 3% VIP hold, DB forecasts 1Q revenue of S$830m (+6% y/y; 5% q/q), property EBITDA of S$379m vs S$385m a year ago and EBITDA margin of 45.6% vs 49.3% (on higher hold of 3.4%). We forecast non gaming revenue to increase 27% y/y on new non-gaming contributions. Property EBITDA margin, bad debt provision and non-gaming operating cost will be key data point to watch out in the coming results following the opening of new non gaming attractions and strong VIP volume growth in 4Q. Consensus FY EBITDA forecasts of
S$1.468bn implies a quarterly run rate of S$367m.

We see upside to DB VIP rolling forecasts; but credit risk remains a concern
We see upside risk to DB’s current 8.0% VIP rolling growth forecast for FY13, should VIP recovery come in stronger and is sustainable. Having said that, we estimate that VIP which accounts for c 52% of RWS’s FY13 GGR, contribute to c 28% of its FY13 gaming EBTIDA. A 1% higher VIP rolling growth (i.e., from 8% to 9%) raises our FY13 EBITDA by 0.4%. A strong surge in VIP rolling volume would translate into higher receivables and risk of higher bad debt provision in the subsequent quarters. In 2012, Genting Singapore’s total net receivables increased 31% y/y while VIP rolling volume fell c 5% y/y and GGR fell 13%, reflecting a lengthening of payment cycle.