This could be the reason why GENTING down

Genting, Genting S’pore down on concerns of lower VIP customer flow 

- by Chua Sue-Ann, theedgemalaysia.com

KUALA LUMPUR: Share prices of Genting Bhd and its subsidiary Genting Singapore plc fell from market open yesterday on concerns of a possible reduced volume in its VIP customers at the latter’s Resorts World Sentosa (RWS) integrated resort.

Genting’s shares opened after the holiday break at RM11.52, falling throughout the day to close at an intra-day low of RM10.90, shedding 62 sen. Some 8.46 million Genting shares were traded.

Across the causeway, Genting Singapore’s shares fell nine cents from S$2.15 to S$2.06 after a day of volatile trading activity with almost 164.32 million shares exchanged.

This came after Citi Investment Research said it reduced its revenue forecast for Genting Singapore’s 4QFY10 results, which is for the period between October and December last year by about 7% to S$765.1 million (RM1.8 billion). Consequently the research house also reduced Ebitda (earnings before interest, tax, depreciation and amortisation) estimate by about 7% to S$371.7 million.

In a note dated Feb 6, Citi Investment Research also said it had conservatively lowered its RWS 4QFY10 VIP rollings assumption to a 5% quarter-on-quarter (q-o-q) decline from the 2% q-o-q growth forecast earlier.

Consequently, the research house also slashed Genting’s earnings estimates for FY10 to FY12 by 1% to 8%.

Genting is expected to report its fourth-quarter results by end of this month.

Citi Investment Research’s revision of Genting’s performance forecasts comes after Las Vegas Sands Corp last week reported a 20% q-o-q drop in its VIP gaming business in its Singapore casino, Marina Bay Sands, sparking concerns that its rival, RWS could see similarly weak performance.

“We believe we could see some ripple effect as the market could become worried about a possible volume decline at Resorts World Sentosa,” Citi Investment Research said.

The research house noted that in Las egas Sands’ 4QFY10 results released on Feb 3, Marina Bay Sands had generated Ebitda of US$305.8 million (RM929.6 million) and a 54.6% margin which had been the highest numbers from any single property in Las Vegas Sands’ history. The results were largely attributed to Marina Bay Sands’ 3.11% VIP hold rate and stringent cost controls, Citi Investment Research said.

Citi Investment Research said it had also lowered its VIP rolling assumption for Marina Bay Sands by 20% and Ebitda by about 3% for the FY11 and FY12 estimates despite guidance from Las Vegas Sands’ management that Marina Bay Sands’ Ebitda in January had reached US$110 million.

Nevertheless, it remained positive on the growth prospects in the Singapore gaming market despite lower volume at Marina Bay Sands’ VIP business and a possible similar decline at RWS.

Singapore is expected to generate US$5.1 billion in gross gaming revenue in 2011, implying that Singapore’s market size with the two casinos was roughly 85% of Las Vegas’ market size, Citi Investment Research said.

Meanwhile, AmResearch yesterday upgraded Genting Singapore to a “buy” from a “hold” with a higher fair value of S$2.60 from the previous fair value of S$2.13.

AmResearch said it raised Genting Singapore’s fair value to account for the expected higher casino revenue growth underpinned by increased VIP gaming turnover, higher casino patronage and a long-term terminal growth rate of 8.5% from FY20 onwards.

Genting Singapore’s forecast net profit growth of over 20% annually from FY11 to FY13 would likely be driven by an expected increase in casino patronage and VIP gaming revenue as well as growth in visitorship and average spending at non-casino attractions, AmResearch said.

“We believe that Genting Singapore is in the early stages of profit growth. Hence, despite the group’s strong core net earnings in the first year of operations, we reckon that there is still upside potential,” AmResearch said in a note dated Feb 7.