GENTING Singapore Plc by CIMB

Quick takes - Junket regulations up the ante - by Joseph Wong Chin Wai CFA
(GENS SP / GENS.SI, OUTPERFORM - Maintained, S$2.15 - Tgt. S$2.70, Travel and Leisure)
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The Casino Regulatory Authority (CRA) has reportedly engaged Spectrum Gaming Group (SGG) to conduct background checks on several entities that have applied for junket licences since 2010. We take a negative view of this development as stringent checks could scare away junkets as they will need to pay higher-than-expected charges for such checks. Furthermore, the charges are not refundable if they fail the probity check. That said, we view this as a longer-term, rather than a near-term concern as we believe that the novelty effect of the IRs will continue to pull in the punters in the near term. This will allow RWS to nurture its higher-margin in-house VIP market by leveraging the Genting group's extensive clientele base. We retain our FY10-12 forecasts, SOP-based target price of S$2.70 and OUTPERFORM rating for Genting Singapore.