Why Overweight (S$1.06 - S$1.60)
Based on 2Q EBITDA of S$514 million, we have raised our EPS and EBITDA estimates by 57-88%. That
implies 2011e EV/EBITDA of 9.5x – attractive in our view. Lower operating costs and better understanding of local market should help company maintain market share Potential disposal of UK asset at a reasonable price (despite registering losses) is positive too. Our EBITDA estimates are 45-60% higher than consensus We remain wary of sustainability of such a high margin following increased competition from MBS.
Key Value Drivers
• Visitor arrival growth
• Full opening of Universal Studio
attraction and aggressive market
thereafter
• Issuance of junket license and
expansion of VIP business
• GENS’ gaming market share
• EBITDA margin
Potential Positive Catalysts
• Sustained market share and margin in
3Q could move consensus
expectations up
• Introduction of junkets could increase
VIP volume
• Introduction of new rides at USS
should drive the traffic
Risks
• Competition intensifies as gaming
industry in the region is liberalized.
• Cannibalization as MBS opens in
phases.
View what other broker's thought here.
Source: Morgan Stanley
