Strong performance from Genting Singapore

PETALING JAYA: Analysts maintained their bullish view for Genting Bhd’s stock, as 52.7% subsidiary Genting Singapore reported a 13 fold increase in net profit on lower impairment in trade receivables, and stronger than expected improvement gaming operations.
Public Investment Bank maintained its “outperform” call for Genting Bhd with an unchanged target price of RM11.15, while Affin Hwang Capital Research reiterated its “buy” call with a target price of RM12.06.
Genting Singapore’s net profit grew to S$143.3 million (RM451.5 million) for Q2’17, a sharp improvement from a S$10.5 million net loss in Q2’16.
Public Investment said lower impairment of receivables were achieved following the execution of a more measured credit policy to reduce high risk VIP business.
“In the medium to long-term, catalysts for Genting include Genting Singapore’s possible venture into the Japanese gaming market, expansion of Resorts World New York and the completion of an integrated resort in Las Vegas,” it said.
Genting Singapore’s redemption of S$2.3 billion perpetual bonds in Sept/Oct 2017 is also estimated to boost Genting’s FY18-FY19F earnings by about 6-7%, Public Investment Bank said.
“The risk of potential impairment at Genting Malaysia (49%-owned by Genting) due to the ongoing legal issue in Massachusetts and delay in the launching of 20th Century Fox theme park are seen as potential downside risk to its share price performance,” it said.
Cumulative 1H17 results made up of 63% of Public Investment’s full-year forecast.
“Although 1H17 has captured the effect of a seasonally stronger Q1’17, we believe Genting Singapore would continue to deliver stronger profit due to a more stable operating environment and rigorous credit policy. As such, we raise our FY17F earnings forecast by 6%.
Genting Singapore declared an interim dividend of 1.5 cents per share (no dividend was declared in Q2’16).
Affin Hwang which expects Genting Singapore’s financial performance to continue as long as it is willing to increase the availability of credit to its VIP patrons, see unfavourable luck factor as a key risk to its estimations.