Genting Singapore

Initiation Report by JP Morgan

Overweight

Playing it forward

Price: S$0.82 Price Target: S$1.20

Company data

52-wk range S$0.32-0.91 Mkt cap (S$MM) 7,861.8 Mkt cap (US$MM) 5,459.6 Share Outstanding (MM) 9646.4 Free float (%) 39.4 Avg. daily volume (MM) 98.6 Liquidity (S$MM) 68.6

Genting Singapore is our top pick within the group

Rating PT Upside

Gent Sing OW S$1.20 47%

Gent Bhd OW M$8.50 35%

Gent Msia OW M$3.50 21%

Source: J.P. Morgan.

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potential upside: We initiate with OW and a Jun-10 PT of S$1.20, implying 47%We believe Genting Singapore (GS) is in a dominant position as it is one of the only two companies with the right to develop and operate an integrated resort (IR) in Singapore (and will maintain this duopoly at least for the next 10 years).

• Building bullish expectations on IRs: (1) We believe IRs help the objectives of the Singapore government, which aims to double visitor arrivals by 2015; (2) with annual tourist arrivals of 10MM (+35MM transiting), Singapore already has the numbers to support two IRs (RWS expects 60% foreign visitors); and (3) a wide catchment area of 700MM people living within a 5-hour flight. Based on the Macau and Las Vegas experience, new casino openings should grow the casino industry pie.

• Run-up to the RWS opening could prompt a share price re-rating:

LVS, Galaxy, and Wynn’s share prices rose 14-85% before and after their casino openings (see page 12). We believe Genting Singapore’s share price could see a similar trend. RWS can leverage Genting Group’s established customer network and management expertise whileRWS’s Universal Studios is also the only branded theme park in Southeast Asia. For FY12, we estimate RWS to have casino revenue of US$1.7B (when the IR is fully completed). Assuming a market share of 40%, this translates into a Singapore casino market size of US$4.3B, which is 4x the size of Malaysia’s and a quarter of the size of Macau’s.

We also assume 7.5MM visitors to Universal Studios in FY12 (compared to 8-9MM visitors to Universal Studios, Osaka).

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EV/EBITDA. This is a concept stock which we think could trade over S$2 using bullish assumptions.Valuation, PT, and risks: Our June-10 PT of S$1.20 is based on our SOTP valuation, in which we value its Singapore business at 14x FY12E