3Q below on lower revenue and margin; buy on weakness

GENS reports 3Q EBITDA of S$347.6m (-31% QoQ), ex UK operation. RWS 3Q Ebitda of S$346.5m came in 8.8% below DB's S$380m and at lower end of consensus range of S$340-420m. RWS revenue fell 15% QoQ to S$731.8m on normalised VIP hold (vs hold heavy in 2Q). Property EBITDA margin fell to 47.3% (vs 2Q at 58.5% and DBe of 50.8%). NP of S$187.8m came in 11% below DB's S$212m. Bad debt provision was S$23.5m in 3Q (similar to 2Q). For 9mFY10, GENS achieves EBITDA of S$995.1m (inc UK) vs consensus S$1.35bn for FY10E. Despite weaker 3Q results and a seasonally stronger 4Q, street est which implies 4Q EBITDA of S$356m, is still too low. Given the weaker than expected 3Q results, any share price weakness offers good buying opportunity for exposure to Singapore's robust gaming market. We maintain RWS full year Ebitda projection of S$1.426bn, suggesting 4Q Ebitda of S$470m. On margin, GENS guided EBITDA margin of 47-50%, lower than DB's 54% projected for 2011 onwards.

S$9.4m/day gross gaming revenue in 3Q. We est that Singapore gaming market expanded c 8% QoQ to S$17.2m/day in 3Q. RWS continued to lead with c 55% market share (vs 69% in 2Q). For the Q, RWS has 470 tables and 1200 slots (vs 631 tables and 1798 slots at MBS). Hotels achieved AOR of 71%; ARR of S$250/nite (vs S$263 in 2Q) and USS daily visitation rose slightly to 7,500 with avg spent of S$81/pax (vs S$84 in 2Q).

Continuous ramping up. Started with 300 tables, GENS now has 470 and likely to end the year with more than 500 tables. The reopening of Battlestar Galactica is scheduled for early next year while two more new USS rides will be introduced by mid and 2H 2011, bringing USS capacity to 18,000 from 8,000 currently. West zone is scheduled to start operations progressively from mid 2011, beginning with the Maritime Xperiential Museum.