Hot stock: Genting Singapore up 7.8% on positive results, earnings prospects

GENTING Singapore jumped nine Singapore cents or 7.8 per cent to S$1.25 after a series of brokerages reiterated "buy" on the stock, following the release of its surprisingly positive earnings, and also expectations that the company will soon be able to bid for a Japan gaming licence when the country's regulations fall in place.

As at 10.16am, some 54.8 million shares had changed hands, making it the most active counter on the market.

The casino operator on Thursday posted a 3.3 per cent increase in net profit for the first quarter, from S$210.2 million in the year-ago period to S$217.2 million. Excluding the one-off gain of S$96.3 million from the disposal of the group's investment in South Korea in Q1 2017, the year-on-year growth in net profit after tax would have seen a jump of 91 per cent. For the three months, revenue rose 15.1 per cent to S$675.1 million from the previous year.

Other positive indicators from its results include the growth in VIP gross gaming revenue on a higher win rate of 3.2 per cent, and higher rolling-chip volume. First-quarter receivables impairment also fell around 40 per cent to S$9.1 million, and the quarter's adjusted Ebitda (Earnings before interest, tax, depreciation and amortisation) margin of 53.2 per cent was also back to levels seen in 2011.

DBS Group Research maintained its "buy" call with a target price of S$1.49.

It said: "Genting's share price corrected by over 10 per cent the past three months due to concerns post the Q4 2017 results that adjusted Ebitda margins would be under pressure.

"We believe these concerns were overplayed, given the dip in margins was largely due to payment of staff bonuses, and margins in Q1 2018 have since rebounded to around 54 per cent, the highest level in over 11 quarters from 44 per cent in Q4 2017.

"At current share price, Genting offers outstanding value for exposure to a growing VIP business and a duopoly market."

Phillip Securities maintained its "add" rating and target price of S$1.40, noting that management was positive on the Japan Gaming Bill and mentioned there is a chance that the Responsible Gambling Bill and Implementation Bill could be sanctioned in fiscal 2018, and bidding for prospective casinos could start in fiscal 2019.

Likewise, OCBC Investment Research kept its "buy" rating and fair value of S$1.45 on the stock, saying that it is positive on its earnings growth prospects.

"We note the opportunity for margins to grow further in the medium term as Genting Singapore embarks on its innovation plan to address challenges such as manpower constraints.

"Genting Singapore notes that the Integrated Resort Implementation Bill has been submitted to the Japan Diet on April 27, and expects the debate on the bill to commence this year."

Nomura also kept its "buy" rating at a target price of S$1.52, saying: "We also expect newsflow on the revamp of Resorts World Sentosa in 2018 once capex and regulatory approvals and details are finalised; this should improve visitation prospects."