Improving VIP volumes is one.
Following two tough years, DBS believes now is the opportune time to buy into a highly cash-generative business in a two-player oligopoly.
"We believe 2017 will mark a recovery in earnings (22% jump in adjusted EBITDA) due to (i) recovery in VIP volumes as volumes bottom out this year (we have penciled in a 3% improvement), (ii) normalising VIP win rate to the 2.85% theoretical rate from c.2.6% in 9M16, and (iii) easing of bad debts given GENS’s more selective and conservative credit policy over the past year."
Here's more from DBS:
Based on our analysis of GENS's cashflow generation and net cash of c.S$3.7bn, balanced against the redemption of its perpetual securities and potential bid for a Japanese casino, we estimate that GENS has the ability to increase its dividend to 6 Scts per annum up (translating to a 6.3% yield) from our FY15F DPS 3 Scts.
We believe the positive market response following the declaration of a 1.5-Sct interim dividend will encourage GENS’s management to return more cash back to its shareholders. This in turn should continue the rerating post the 3Q16 results.
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