Genting Singapore : Game on.

Since hitting a 52 week high of S$2.35 on 9 November 2010, Genting Singapore has fallen 15% to S$1.99. Genting currently trades at 17.9x CY12 P/E and 3.9x P/BV.

In our view, Genting Singapore trades at an attractive valuation, fundamentally backed by strong growth drivers going forward. We believe Genting Singapore offers great upside potential going forward.

3Q10 results recap. 9M10 core earnings came in above expectations and a seasonally strong year-end could surprise analysts on the upside. We see medium-term catalysts from speedier ramp-up of their RWS operations, licensing of junkets as well as sustained market leadership.

RWS operations ramp-up. 3Q10 table count grew 24% qoq from 380 in 2Q10 to 470 in 3Q10. We were positively surprised as we were expecting a gradual operation ramp-up and existing count is already above management’s guidance of 450 tables by year end. In view of strong demand trend, management is expecting the average table count to settle at 500 by year-end.

Receivables could improve with introduction of junkets. Though investors might be concerned about seemingly high trade receivables, (20% of revenue), management reiterated its confidence in balancing revenue with credit extension. Although we acknowledge that this figure is high compared its Macau and Malaysia peers, we believe the introduction of junkets should lighten the burden on Genting Singapore ’s balance sheet going forward.

Recommendation: In spite of the recent hiccups on the macroeconomic front, we believe continued economic growth in Asia should drive gaming demand growth for Genting Singapore . We believe Genting Singapore will be able to benefit from favourable industry factors going forward. We currently have an Outperformrecommendation with target price of S$2.70.