Genting Singapore shares surge after 3Q18 net profit climbs

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Shares of Genting Singapore jumped in early trade, despite a decline in the broader market, after analysts were generally positive over the integrated resort operator’s third quarter earnings report.

The stock was up 6.74 percent at S$0.95 at 9:49 A.M. SGT, while the STI was down 0.86 percent at 9:35 A.M. SGT.

GENS reported on Thursday that its third quarter net profit rose 25 percent on-year to S$210.41 million amid a strong performance in its attractions business.

After the results, Maybank KimEng upgraded the stock to Buy from Hold, noting nine-month core net profit came in at 83 percent of its full-year estimate, above its expectations. It raised its earnings estimates and nudged up its target price to S$1.29 from S$1.26.

“Third-quarter of 2018 results not only pleasantly surprised us, but GENS is cautiously optimistic on its outlook,” the brokerage said in a note on Friday.

Maybank KimEng noted that the stock had tumbed around 28 percent since GENS reported weaker-than-expected second quarter earnings, leaving valuations hovering near Global Financial Crisis lows. It noted that traders may be concerned that the Macau’s VIP market deceleration could spill over to Singapore.

But it added, “We opine that such ‘crisis’ valuations are unwarranted as there are no signs of any crisis. In fact, GENS is cautiously optimistic on its outlook, especially the VIP market.”

That view was echoed by Nomura, which in a late Thursday note titled “good results and attractive valuation.”

It noted that Genting Singapore’s VIP roll jumped 13 percent on-year in the quarter even as competitor Marina Bay Sands posted a 25 percent on-year decline. Nomura also pointed to GENS non-gaming business, where revenue rose 9 percent on-year in the quarter on higher prices for the water theme-park-related business and nearly full occupancy at its hotels at a higher average daily rate.

“While some of the de-rating can be explained by a correction in regional gaming stocks and trade war fears, we feel current depressed valuations are unjustified in the face of a strong earnings showing by the company,” Nomura said.

The investment bank added that interest in the stock was likely to remain high in the run-up to bids for Japan integrated resorts, which should limit any downside for the stock.

In the results, Genting Singapore said it was speaking with various cities about a potential bid. Analysts have pointed to Genting Singapore as a strong contender to win an IR bid.

Nomura kept a Buy call and raised its 2018-19 earnings forecasts by 4 percent each, but trimmed its target price to S$1.39 from S$1.47 after rolling the valuation forward to 2019 forecasts and lowering its target enterprise value-to-EBITDA multiple. EBITDA stands for earnings before interest, tax, depreciation and amortization.