Genting Singapore from JP Morgan Research

Rating : Overweight
Price : S$0.94
Target Price : S$1.20

FY09 results slightly below; Spore casino opening within expectations

1) Result slightly below expectations; we maintain OW: Genting Singapore reported an FY09 core net loss of S$167MM vs. our estimate of S$149MM. We are not changing our rating.
2) Weaker UK operations in 4Q09: UK operations contributed S$23MM in FY09 and S$33MM in 9m09. The weaker 4Q09 numbers are due to a poorer luck factor and weaker attendance.
3) RWS casino operations within expectations, so far: Visitor arrivals to the casino were 20,000-25,000 per day in the first five days of operation, which could equate to 7.3MM visitors per annum (by simply extrapolating 20,000 visitors per day); this is above our estimate of 5MM visitors to the casino in FY10. This is in spite of the milder marketing efforts given the initial uncertainty of the opening date. Note that the company is maintaining its visitor arrival forecast of 13MM visitors within the first year of opening.
4) Share price has been weak lately and may remain weak in the short term: This, we believe, is due to (1) recent mandatory conversion of S$322MM of CBs into 338MM new shares, and (2) some initial issues such as the long lines outside the casino and less experienced dealers.
5) Price target, valuation, key risks: We remain OW on the stock with a fundamental PT of S$1.20 as we believe in the long-term prospects of the two Singapore IRs, while we believe that there is upside potential to our FY10E numbers (judging by the very preliminary numbers above). We reiterate the benefit Genting should reap from having 100% market share in the casino segment for at least the next three to five months before the opening of the Sands casino.