Genting Singapore may rise after reporting ‘a great quarter’

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Shares of Genting Singapore may rise on Friday after the casino operator reported strong first-quarter results.

Nomura called it “a great quarter,” in a note on Thursday, adding it expected the stock’s valuation “should bounce.”

Genting Singapore reported its first-quarter net profit rose 3 percent on-year to S$217.29 million, while revenue was up 15 percent at S$675.11 million. The company noted there was a year-earlier one-off gain of S$96.3 million on the disposal of an investment in South Korea; excluding that, net profit after tax would have risen 91 percent, it said.

At the Singapore integrated resort, gaming revenue rose 17 percent on-year and 22 percent on-quarter to S$507.43 million, while non-gaming revenue rose 10 percent on-year and 3 percent on-quarter to S$167.11 million, the casino operator said in an SGX filing after the market close on Thursday.

“The ongoing strategy to focus on affluent regional business proved to be effective as the mass and premium mass business continued to deliver encouraging results. The Lunar New Year period saw bustling VIP rolling volume, notwithstanding a calibrated credit risk model,” the company said in the statement.

Nomura said the first quarter earnings were 33 percent of consensus expectations for the full year, beating forecasts on a 36 percent on-year jump in VIP roll, even as competitor’s volumes fell on-year during the quarter, and on some cost normalization.

Rising earnings forecasts?

While the bank said investors shouldn’t annualize the first quarter numbers for the full year amid a higher hold and seasonal strength, it still “saw scope” for earnings forecasts to be raised. Nomura increased its 2018 and 2019 earnings forecasts by 10 percent and 5 percent respectively to incorporate the stronger first quarter.

Nomura said it was watching for newsflow on the progress of Japan’s integrated resorts bill, which is “making good progress” toward possible passage this year.

“We think interest in GENS should remain high in the run-up to the Japan IR (Integrated Resort) bids, thus limiting downside to some extent in case of any luck-driven quarterly miss,” it said. “For now, we believe it is too early to build in any value accretion due to the binary nature of the outcome.”

Nomura also pointed to expectations for an update on Genting Singapore’s plans to refurbish Resorts World Sentosa, withh the company still in talks with the government and finalizing its budget.

“We expect that news of the revamp at the resort would come as another boost to future visitation numbers, and could be another tailwind for the stock price,” Nomura said.

It kept a Buy call on the stock with a target price of S$1.52.

The stock ended Thursday flat at S$1.16.