Genting Singapore: Disappointing 4Q09 Results

By Carey Wong
Mon, 22 Feb 2010, 09:29:04 SGT

Genting Singapore (GS) reported a pretty disappointing set of 4Q09 results Friday; revenue fell 25.6% YoY and also 11.2% QoQ to S$125.0m, hit by weak UK operations; takings were affected by lower patronage due to the cold front across Europe, poorer win factor as well as weaker STG against the SGD. And because of the sharp jump in pre-opening start-up costs (~S$77m) incurred for RWS (Resorts World Sentosa), net loss widened to S$101.7m from losses of S$6.8m in 4Q08 and S$93.3m in 3Q09. For the full year, revenue fell 22.1% to S$491.2m, way short of our S$586.9m, while net loss widened 122.4% to S$277.6m; underlying net loss of S$167.0m was also wider than our forecast of S$99.6m. In view of the latest developments, we have fine tuned our numbers; paring FY10 revenue by 6.7% and increasing our net loss estimate to S$15.1m from S$7.5m. As we have also nudged up the discount rate in our DCF model, our fair value eases from S$1.35 to S$1.04. Disappointing results may result in negative knee-jerk reaction but we maintain BUY, especially below S$0.90.

Disappointing 4Q09 results. Genting Singapore (GS) reported a pretty disappointing set of 4Q09 results Friday. Revenue fell 25.6% YoY and also 11.2% QoQ to S$125.0m, hit by weak UK operations; takings were affected by lower patronage due to the cold front across Europe, poorer win factor as well as weaker STG against the SGD. And because of the sharp jump in pre-opening start-up costs (~S$77m) incurred for RWS (Resorts World Sentosa), net loss widened to S$101.7m from losses of S$6.8m in 4Q08 and S$93.3m in 3Q09. Underlying net loss (excluding fair value adjustments) amounted to S$82.3m versus a net profit of S$3.3m in 4Q08 and a net loss of S$19.9m in 3Q09. For the full year, revenue fell 22.1% to S$491.2m, way short of our S$586.9m, while net loss widened 122.4% to S$277.6m; underlying net loss of S$167.0m was also wider than our forecast of S$99.6m.

UK operation faltered in 4Q09. Poorer-than-expected performance from its UK operations (both revenue and earnings) was the main reason for GS missing our full-year estimates. Going forward, management guides that it still has little visibility as the UK economy (Euro zone as well) remains soft and will continue to have an adverse impact on discretionary spending for some time.

RWS slowly gearing up to full capacity. RWS has started its casino operations on 14 Feb and according to media reports, some 149k people visited the casino in the first week of operations. Although visitor numbers have eased slightly after the Chinese New Year holidays, management notes that the numbers have been within its expectations. Currently, RWS is running just 270 tables (out of the 530 available), but management expects the ramping up to full capacity should not take more than 4-6 weeks once initial teething problems are ironed out. As for Universal Studios Singapore (USS), which is already fully staffed at 8k employees, GS expects to open the theme park in Mar. Separately, RWS has teamed up with Tiger Airways to lease a plane to provide an “air bridge” between its target markets, especially the secondary cities in China, and itself.

Easing fair value to S$1.04. In view of the latest developments, we have fine tuned our numbers; paring FY10 revenue by 6.7% and increasing our net loss estimate to S$15.1m from S$7.5m. As we have also nudged up the discount rate in our DCF model, our fair value eases from S$1.35 to S$1.04. The disappointing results may result in negative knee-jerk reaction but we maintain BUY, especially below S$0.90.

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