Genting Singapore: Sticking to SELL
Japan finally legalized casinos yesterday, with proponents hoping to pass further legislation next year that would enable the first casino to open in the early 2020s. Even assuming that our 4% terminal growth rate does not already reflect greater growth opportunities for the company, GS’s current price in excess of our fair value seems to imply an optimistic 40% chance of winning a Japan casino license, based on our rough estimates given the lack of details at this point. Furthermore, while there are many reasons for selling one’s holdings, we also note that COO Tan has disposed 10m out of his 12m shares in GS on 28/29 Nov for proceeds of S$9.6m, suggesting that an insider may deem ~S$0.96 a favorable price to divest. GS is trading at a consensus blended forward EV/EBITDA of (11.5x) – a 34% premium to its 2yr average of (8.6x) and a 15% premium to its 5yr average (10.0x). We maintain SELL on Genting Singapore with an unchanged fair value of S$0.75.
Property Devt & Invt
Sales continue to track higher yoy
■ Nov and 11M16 residential sales higher yoy.
■ We expect prices to continue declining in 2017 on the back of supply and rental drag.
■ Concerns priced in, maintain Overweight. Top picks: UOL, City Dev, Capitaland. RCR and OCR transactions continue to dominate
● Total Nov primary home sales came in at 1,110 units, or 860 units excluding executive condominiums (ECs). Although lower vs. Oct, the sales performance was above the corresponding 2015 level by 17.5%/13.3%. The best-selling projects were Parc Riviera (128 units, ASP S$1,189psf) and Queen’s Peak (271 units, ASP S$1,628psf).
As a result, sales in the Rest of Central Region (RCR) and Outside Central Region (OCR) constituted 96% of sales while sales in the Core Central Region (CCR) made up a small 4%.
Singapore Airlines (SIA SP)
Pax Loads Continue To Decline In The Traditionally Peak Quarter
The decline in SIA’s pax load factor accelerated in November despite the peak travel period. This was led by an 8ppt decline in loads to Southwest Pacific, which SIA attributed to industry capacity additions. This highlights the risk to SIA’s traffic on the Kangaroo route which will likely be exacerbated by the open skies agreement between China and Australia. Australia is an important originating market for SIA and loads on this sector could continue to fall. Maintain HOLD with target price of S$10.10. Entry level: S$8.90.
Fed Rate Cycle
Fed is late in raising rates
Fed is behind the curve in raising the rate
It was inevitable for the Fed to raise interest rate
We expect the trajectory of interest rate hike should be steeper than their projection
Check out our compilation of Target Prices