Strong rebound will extend till 2Q13.
Here's more from DBS:
Below expectations again. 3Q12 EBITDA came in at S$303m (-19% y-o-y, -3% q-o-q), bringing 9M12 EBITDA to 62-70% of our and consensus’ full-year estimates. The drag came from: a) Lower VIP win rate (2.8% vs 2Q12: 3.1%, 3Q11: 3.2%); b) Continual contraction in rolling chip (-3% qoq vs MBS +2%); and c) Softer mass volume (table & slots 3-4% qoq vs MBS’ 4-6%). EBITDA margin was lower at 46% (3Q11: 48%) due to pre-opening expenses for Western Zone (impact to last till 1Q13). GENS also recognised S$1.3m loss on disposal of its investment in Echo.
Still trailing behind. If we were to normalize MBS’ poor luck factor over the past 2 quarters, RWS’ GGR market share would have declined by 3ppts to 46% (47% based on rolling chip & mass drop). While targeting new markets with Western Zone (completing soon), RWS will remain cautious in lending to new customers which could result in tepid growth for VIP segment. Receivables remained stable at 1/3 of gaming net revenue with debt impairment inching up by 1ppt q-o-q to 5% of receivables.
Earnings to rebound soon. 4Q12-1Q13 should be seasonally stronger given festive and school holidays while 2Q13 should see EBITDA margins recover as Western Zone ramps up. 2013 will likely remain challenging given the slowdown in China’s economic growth (affects VIP market), policy risk (amendments to Casino Control Act to be tabled in Parliament by year-end), and rising regional competition (eg new casinos opening in Manila Bay).
Potential wildcard: faster than expected liberalization of Japan’s gaming market which could see GENS as one of the front-runners given its IR experience, strong balance sheet and global network.
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