Nomura: Positive on Genting Singapore on expectations for a looser credit policy

Cards, poker chips and diceCards, poker chips and dice

Nomura increased its earnings forecasts for Genting Singapore on expectations for a looser credit policy ahead.

That was after Genting Singapore reported Thursday its first-quarter net profit fell 5 percent on-year to S$205.47 million as gaming revenue declined.

Nomura said in a note Thursday the results beat its forecast on a better luck factor, but it pointed to a near-term negative from the 16 percent year-on-year decline in VIP rolling chip volume after six quarters of on-year growth.

“This represents a reversal in the trend of growing VIP roll for RWS (Resorts World Sentosa), and a sign of increasing caution with the credit program at RWS as trade tensions escalate, in our view,” Nomura said.

But it added that it raised its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) for 2019 and 2020 by 3 percent each, which indicates a 3-4 percent increase in earnings for those years.

“In the near term, we are positive on the prospect of steady VIP volumes and growth in mass-market through loosening credit policy and
additional third-party hotel room capacity at Sentosa island,” Nomura said.

In the medium term, the investment bank said once the capital expenditure for revamping RWS is completed, the resort expansion was set to boost visitation and earnings. Any positive free cash flow would either support a higher dividend of the bid for a Japan casino-resort, the note said.

Nomura raised its target price to S$1.31 from S$1.27 and kept a Buy call.

Shares of Genting Singapore ended Friday down 1.58 percent at S$0.94.


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