■ MBS results positively surprised us with VIP volume growth and stable mass market GGR.
■ Positive read through for GENS. We gather that RWS may report 3Q15 EBITDA of ~SGD275m (+8% YoY, +39% QoQ).
■ Even so, trim FY16/FY17 EBITDA by 2% to reflect weaker VIP operations and TP by 2% to SGD0.86. Maintain BUY call.
Marina Bay Sands (MBS) reported 3Q15 EBITDA of USD389.7m (+11% YoY, +7% QoQ) on 3Q15 revenue of USD750.7m (+2% YoY, +5% QoQ).
Two items attracted our attention in its disclosure:
1) 3Q15 MBS VIP volume (rolling chip volume) grew 25% YoY and 20% QoQ in USD terms (3Q15 Macau VIP volume: -53% YoY).
2) 3Q15 MBS mass market GGR (non-rolling chip revenue) was flattish YoY and QoQ in USD terms despite the weak MYR and IDR. Malaysia and Indonesia are core markets for the mass market.
What’s Our View
We estimate RWS’ 3Q15 VIP volume will be down 30-40% YoY to about SGD11b which implies volume share will be down 5ppts QoQ to 42%. Yet, RWS 3Q15 VIP volume of SGD11b will be within our expectations. What interests us more is that the 3Q15 MBS mass market GGR hints that 3Q15 RWS mass market GGR may also be stable. Assuming 3Q15 RWS VIP volume and mass market GGR are flat QoQ coupled with 2.85% VIP win rate, we estimate that RWS will generate 3Q15 EBITDA of ~SGD275m (+8% YoY, +39% QoQ, 9M15 EBITDA: ~SGD700M or -28% YTD).
Even so, we take the opportunity to revise our estimates to reflect
(i) lower VIP volume post-2016 due to less Chinese VIPs and
(ii) lower depreciation as GENS is revising its depreciation policy (Figure 5).
Although we raise our core earnings estimates due to lower depreciation, we trim our EV/EBITDA based TP by 2% to SGD0.86 as our revised FY16/FY17 EBITDA estimates are 2% lower. With 10% upside potential, maintain BUY call on GENS. (Read Report)
Source : Maybank Kim Eng Research