Genting Singapore by citibank

Genting Singapore (GENS.SI)
Read Across from LVS Results – Lowering TP to S$2.60 LVS: VIP Volume Fell in Singapore — Las Vegas Sands (LVS.N; US$46.03; 1L) reported its 4Q10 results on Feb 3rd. MBS generated EBITDA of US$305.8m and a 54.6% margin (both are the highest quarterly numbers from any single property in LVS' history) thank largely to the 3.11% VIP hold rate and its stringent cost controls. However, the major disappointment in our view was the ~20% QoQ fall in VIP rollings. Despite LVS management’s guidance that MBS EBITDA in Jan has reached US$110m, we lowered our MBS VIP rolling assumption by 20% and EBITDA by ~3% in 2011-12E. LVS’ stock price fell 8.45% on the next trading day.
 Implications — We believe we could see some ripple effect as the market could become worried about a possible volume decline at Resorts World Sentosa. We would not be surprised to see some share price weakness in Genting Singapore when the stock market reopens on February 7th. At this stage, we have conservatively lowered our 4Q10 VIP rollings assumption from 2% QoQ growth to 5% QoQ decline. Consequently we have reduced our 4Q revenue forecast by ~7% to S$765.1m and EBITDA estimate by ~7%to S$371.7m. Our 2010-12E earnings estimates as a result have been cut by 2-9%.
 Market Size — Despite lower volume at MBS’ VIP business and a possible similar
decline at RWS, we continue to like the growth prospect in the Singapore gaming
market. We expect Singapore to generate US$5.1bn in gross gaming revenue in 2011, implying that the market size of Singapore, with only two casinos, is roughly
85% of what Las Vegas is.
 Maintain Buy (1M); Lowering TP to S$2.60 — Genting Singapore is expected to report its 4Q10 results in mid-February. To derive our target price, we continue to assign equal weights to equity values derived from our SOTP and DCF valuation methodologies. Based on the lowered earnings estimates, we have accordingly
trimmed our target price from S$2.75 to S$2.60.