Signs of stability seen in Genting Singapore operations

Better productivity could be coming soon.

According to OCBC Investment Research, Genting Singapore has suffered a double-digit decline in share prices due to the weaker-than-expected 1Q13 results over the weekend, but it noted a silver lining that the gaming giant's operations, particularly in the non-gaming business, are entering a so-called "steady state" that couled produce better yield and productivity.

Here's more from OCBC:

Post-results sell-down expected. Genting Singapore (GS) recently saw a pretty sharp tumble in share price, falling some 14% to a recent low of S$1.41, after we downgraded our call from Hold to Sell; this on the company posting slightly softer-thanexpected 1Q13 results on 2 May. In addition, we believe that part of the sell-down may be due to the slightly more cautious outlook given by management as compared to the one given during the previous 4Q12 results briefing.

Non-gaming operations are stabilizing. Nevertheless, we believe that its operations are entering a “steady state”, especially for the non-gaming business, now that Resorts World Sentosa (RWS) will be in its first year of being fully opened. According to management, the focus will be on maximizing yield and getting better productivity from its attractions. For example, the Marine Life Park has been averaging some 8.2k daily visitors since it opened late last year, and it expects to welcome its 1-millionth visitor this month. As for Universal Studios Singapore, there are already 23 attractions on site and would be opening its 24th attraction soon.

Focus on foreign premier gamers. As for its gaming business, GS does not expect to see much impact from the recent revision in the gaming rules that introduced more measures (most voluntary) to curb casino visits for financially distressed persons. For one, RWS has already been operating under such rulings. Secondly, the IR’s main focus remains on growing the market for foreign premier players. GS had previously identified these markets as those within a 5-hour flight from Singapore.

Upgrade to HOLD. We have already pared our estimates after its 1Q13 results and we see no need for any revision for now. But we upgrade our rating from Sell to HOLD as the current share price is hovering around our unchanged DCF-based fair value of S$1.41.