Friday, July 31, 2009

Genting Singapore: New Starlet in Town

Proxy to Singapore casino market. Genting Singapore (GENS) has the largest exposure to Singapore's US$3b gaming market (89% of SOP, virtually 100% of 2011 EBIT). Resorts World at Sentosa (RWS) can tap on Singapore's existing domestic gaming market, rising regional tourism and leverage on Singapore's transformation into a global city.

Synergistic partnership: Genting+Universal Studios. We expect gaming revenue to come mainly from the more resilient and higher-margin grind segment (60:40 grind-VIP distribution, almost similar to Genting' 70:30). Universal Studios should help draw in the mass-market to RWS - differentiating it from Marina Bay Sands' MICE/business visitors focus as well as help diversify revenue base (non-gaming: 25-30% of revenue).

Potential first mover advantage. RWS could open earlier than expected, possibly in Dec 09/ Jan 10 to coincide with the Chinese New Year peak season. It could overtake Marina Bay Sands (launch postponed to 1Q10 from end-09) - an advantage in locking in local market share (S$2,000 annual pass in lieu of S$100/entry to be paid by Singaporean residents is exclusive to one casino). RWS' construction is on-track: 71% of project cost has been awarded to date with testing/ commissioning of ride equipments scheduled for Nov 09.

Potential catalysts: a) Award of casino licence in 4Q09 (already fulfilled requirement of >50% commitment spending and GFA construction), b) announcement of exact soft opening date, c) encouraging response for hotel bookings, and d) recovery in UK casino operations.

Sum-of-parts of S$0.98, valuing RWS at S$0.87/share (based on DCF assuming 7.8% WACC, 1.5% long-term growth). We expect RWS to be profitable in the first year of operation and earnings to grow at a 5-year CAGR of 37% (assuming no. of tables increase progressively from 500 to 1,000).

Sponsored Links

Related Posts by Categories



No comments: