Genting Singapore: BUY (Reinstating coverage) S$0.835

New Starlet in Town;
Price Target : 12-Month S$0.98

・ Reinstating coverage with Buy, S$0.98 TP (sum-of-parts)
・ Proxy to Singapore’s new casino market
・ Leverage on Genting’s strength in mass-market and Universal Studios’
global brand
・ Potential first mover advantage
Proxy to Singapore casino market. Genting Singapore (GENS) has the
largest exposure to Singapore’s US$3b gaming market (89% of SOP,
virtually 100% of 2011 EBIT). Resorts World at Sentosa (RWS) can tap on
Singapore’s existing domestic gaming market, rising regional tourism and
leverage on Singapore’s transformation into a global city.

Synergistic partnership: Genting+Universal Studios. We expect gaming
revenue to come mainly from the more resilient and higher-margin grind
segment (60:40 grind-VIP distribution, almost similar to Genting’
70:30). Universal Studios should help draw in the mass-market to RWS -
differentiating it from Marina Bay Sands’ MICE/business visitors focus
as well as help diversify revenue base (non-gaming: 25-30% of revenue).

Potential first mover advantage. RWS could open earlier than expected,
possibly in Dec 09/ Jan 10 to coincide with the Chinese New Year peak
season. It could overtake Marina Bay Sands (launch postponed to 1Q10
from end-09) - an advantage in locking in local market share (S$2,000
annual pass in lieu of S$100/entry to be paid by Singaporean residents
is exclusive to one casino). RWS’ construction is on-track: 71% of
project cost has been awarded to date with testing/ commissioning of
ride equipments scheduled for Nov 09.

Potential catalysts: a) Award of casino licence in 4Q09 (already
fulfilled requirement of >50% commitment spending and GFA construction),
b) announcement of exact soft opening date, c) encouraging response for
hotel bookings, and d) recovery in UK casino operations.

Sum-of-parts of S$0.98, valuing RWS at S$0.87/share (based on DCF
assuming 7.8% WACC, 1.5% long-term growth). We expect RWS to be
profitable in the first year of operation and earnings to grow at a
5-year CAGR of 37% (assuming no. of tables increase progressively from
500 to 1,000).