Genting Singapore 1H12 profit down 27%

The two recently approved junkets and the new Equarius Hotel & Beach Villas failed to attract higher net worth customers.

2Q12 core net profit of SGD171.3m (-16% YoY, -23% QoQ) brought 1H12 core net profit to SGD393.6m (-27% YoY). 1H12 revenue of SGD1.5b is also down by 9% YoY.

No dividends were declared but GENS expects 2012 DPS to be at least flattish YoY at 1 cent.

According to MayBank KimEng analyst Yin Shao Yang,1H12 results were in line with their expectations only due to a VIP hold of 3.3% (2Q12: 3.1%) vs. their 2012 assumption of 2.85%. Overall though, fundamentals of GENS, he said, are disappointing.

"Drilling deeper into the results, 2Q12 EBITDA of SGD311m (-10% YoY, -17% QoQ) and EBITDA margin of 44% were the weakest on record. Operations-wise, we estimate that 2Q12 VIP volume fell 18% YoY and 14% QoQ while mass market GGR fell 5% YoY and 8% QoQ," Yin said.

Here's more from Yin:

A lot of effort put in but not much to show for it. The two new IMAs (since Mar 2012) and the new Equarius Hotel & Beach Villas (since Feb 2012) failed to lift VIP volume. GENS attributed this to a poor economic environment. Coupled with 1,300 new employees to staff the Marine Life Park which is expected to open by year-end, margins are expected to remain subdued for the next two to three quarters.

We cut our FY12-14 net profit estimates by 10-15% on lower VIP volumes. Our EV/EBITDA-based TP is lowered to SGD1.31 (-6%). M&A opportunities are unclear, giving us no reason to lift our call on both valuation and M&A grounds

Cutting earnings estimates by 10-15% and TP to SGD1.31. 2Q12 total VIP volume (Resorts World Sentosa and Marina Bay Sands) fell 11% YoY and 12% QoQ and we are bearish on 3Q12. Annualising total 2Q12 VIP volume of SGD27.8b would see 2012 VIP volume fall 8% YoY. Our revised estimates assume this will be the case, though partially offset by a raised 3.1% VIP hold for 2012 (1H12 VIP hold was 3.3% which implies 2H12 VIP hold of 2.85%). On an unchanged 11x 2012 EV/EBITDA, we trim our TP to SGD1.31 (-6%).

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