A quick look at the result
SGR’s revenue was in-line with our forecasts while EBITDA came in ahead of our forecasts (and Factset consensus) at A$588.1m while the normalised NPAT of A$258m was well ahead of Factset consensus at A$245.1m and our estimate of A$242.6m. Substantially lower interest costs and good margin improvement in Sydney drove the beat (and made up for the QLD miss).
The final dividend of 13cps was ahead of our expectations as well. Net debt (after adjusting for derivative financial instruments) was slightly higher than our forecast and came in at A$678m, down from A$787m in the previous corresponding period (PCP). Meanwhile cash conversion was 105%.
FY19 outlook commentary is positive
The company has flagged broad based revenue growth across the group in FY19 so far and there has been an improvement in the domestic revenue growth trends from FY18 into early FY19. SGR has noted improved Sydney PGR table performance with higher hold rates and volumes compared to the PCP and VIP volumes in FY19 have been pleasing.
Management noted that they plan to ramp up the marketing activities to existing VIP and premium customers of Chow Tai Fook Enterprises Limited and Far East Consortium International Limited which should help lift visitation for the SGR group. The lower capex estimates compared to those provided at the investor day in May should be well received as well.
Changes to forecasts
We have made a number of changes to our forecasts which have resulted in reductions to FY19-21 EBITDA of 2.1%, 4.2% and 3.1% to A$623.3m, A$653.6m and A$695.6m respectively. Normalised NPAT forecasts now sit at A$268m (-4.9%), A$291.3m (-3.2%) and A$317.4m (-1.2%) for FY19-21.
Maintaining an Add rating
We continue to believe SGR will reward patient investors and retain an Add rating on the stock given the FY19 EV/EBITDA multiple of 9.2x.
Our DCF based target price has changed slightly (Morgans clients can log in to view). Risks to our valuation include the global economic environment, a reduction in consumer spending, competition and regulatory changes.
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