Genting Singapore - OCBC Investment 2019-04-04: S$4.5b Commitment For RWS2.0


Genting Singapore - S$4.5b Commitment For RWS2.0

  • IR exclusivity till 2030.
  • Investments of S$4.5b.
  • Wider attractions at RWS.

Exclusivity extended till 2030; Nintendo coming to town

  • In the latest government statement, Singapore will be extending the exclusive licenses for the two casino operators in Singapore until 2030, after they commit to invest S$9b to develop additional tourism attractions.
  • For GENTING SINGAPORE LIMITED (SGX:G13)’s Resorts World Sentosa (RWS), it will embark on a S$4.5b expansion; termed as RWS2.0. This comprehensive investment will greatly enhance RWS’s attraction as a tourist destination.
  • About 164,000 sqm of new attractions will be added, starting from 2020, with completion slated for 2025.
    • The S.E.A. Aquarium will be expanded to create Singapore Oceanarium, which will be three times larger than the current aquarium.
    • Two new themed attractions, Super Nintendo World and Minion Park, will be coming to the island.
    • Two new hotels with a capacity of around 1,100 rooms will also be added.
    • A new driverless transport system (DTS) will also bring about better connectivity to RWS and the rest of Sentosa Island.

More gaming space

  • Resorts World Sentosa (RWS) will be able to expand its casino space by 500 sqm.
  • From March 2022, both IRs will have to pay higher casino tax rates under a new tiered structure. Premium gaming will be taxed at 8% for the first S$2.4b of gross gaming revenue, and 12% for gaming revenue in excess of S$2.4b. Mass gaming will be taxed at 18% for the first S$3.1b and 22% for any excess revenue. This compares to 5% on premium gaming and 15% on mass gaming currently.
  • In addition, Singapore citizens and permanent residents will have to pay higher entry now, rising 50% to $150 for 24 hours. New attractions at both IRs are expected to attract 500,000 more tourists and contribute about S$500m to GDP in addition to creating 5000 new jobs.

Long term earnings certainty

  • New gaming space will only be permitted after the completion of all the non-gaming development. Management is planning to cap the entire cost to within the S$4.5b and this will be funded by internal funds and borrowings (which will likely start only from end-2020). When fully developed, its facilities will be able to capture more Meetings, Incentives, Conferences and Exhibitions (MICE) attendees and more tourists to its expanded hotels and tourist attractions.
  • Management is committed to its current dividend policy.
  • Maintain fair value of S$1.31 and BUY rating.

Carmen Lee OCBC Investment Research | 2019-04-04
SGX Stock Analyst Report BUY MAINTAIN BUY 1.310 SAME 1.310