GENTING SINGAPORE LIMITED (SGX:G13)
Genting Singapore 4Q19 - Coronavirus Attack, But Not A Big Deal
- Genting Singapore's 4Q19 EBITDA and full-year results met expectations. VIP volume dropped 2% y-o-y while mass market GGR softened for the fourth quarter in reaction to Apr 19’s casino entry levy hike. While the coronavirus impact brings near-term uncertainty, our black sky scenario suggests a trough value of S$0.80.
- A key positive is the surprise rise in dividends (yielding > 4.5%), backed by hefty net cash of 33 S cents/share.
- Positive progress in Japan IR’s bid remains a key re-rating catalyst.
4Q19 RESULTS
Healthy 4Q19 EBITDA in line with expectations.
- Genting Singapore (SGX:G13) reported 4Q19 adjusted EBITDA of S$287.6m (+0.5% y-o-y, +3.5% q-o-q), bringing 2019 adjusted EBITDA to S$1,189.6m (-3.3% y-o-y), accounting for 99% of our forecast. The luck adjusted EBITDA for 2019 was S$260m. See Genting Singapore Announcements.
Final DPS a pleasant surprise.
- Genting Singapore declared a 2.5 s cents final DPS (4Q18: 2 S cents), bringing full-year DPS to 4 S cents (2018:3.5cents) and implying yield of 4.5%. This was above the previously guided 3.5 S cents, and should be sustainable in 2020.
VIP: GGR fell on RCV decline and steady win rate.
- Genting Singapore’s VIP GGR is estimated to have fallen by 2.2% y-o-y but risen 20% q-o-q to S$277m.
- Unlike its rival Marina Bay Sands, Genting Singapore recorded marginally lower rolling chip volume (RCV) growth – estimated at -2% y-o-y and - 8.1% q-o-q, paired with a steady win rate of 3.4% (3Q19:2.6%, 4Q18: 3.4%).
- Separately, we note that Genting Singapore’s 4Q19 RCV growth underperformed its rival, Marina Bay Sands (+14.9% y-o-y, +8% q-o-q), with Genting Singapore’s market share falling to 43% in 4Q19 (3Q19: 47%, 4Q18: 47%).
Mass market: Another quarter of depressing GGR as entry levy hike impact deepened.
- We estimate mass market GGR shrank 16.9% y-o-y to S$325m, attributed to lower local patronage reflecting the full impact of the entry levy hike (50% increase in casino entry levy to S$150/entry in Apr 19). This plunge is worse than rival MBS’, which saw mass GGR declining only 3.1% y-o-y, thus causing Genting Singapore’s market share of industry GGR to worsen to 35% in 4Q19 (4Q18: 44.1%).
STOCK IMPACT
Infected by Wuhan coronavirus...
- This is due to RWS’ high reliance on Chinese tourists ( > 20% of total arrivals) and with there being a significant decline in tourist visitations on China’s group tour ban and travel restrictions.
- Meanwhile, while the recent confirmed case of one RWS casino worker would continue to depress visitations, we expect RWS to remain open (unlike in Macau) as the dependency on mainland Chinese tourists is not overbearing. While we do not have similar historical events performance for Genting Singapore (during SARS, RWS was not opened yet; during the H1N1 outbreak, Genting Singapore's share price rallied on the back of RWS' ramp up), our black sky scenario analysis indicates that interim earnings could fall at an annualised rate of 17-50% (refer RHS) until the disease is contained, and our assessed trough value of Genting Singapore is around S$0.80, 4.6x 2020F EV/EBITDA (-2SD below mean, see recent report: Genting Singapore - UOB Kay Hian 2020-02-11: Wuhan Coronavirus Spreading Fear).
…but business as usual.
- Despite an obvious expected fall in patronage and hotel occupancy during the infected period, we expect casino and outdoor facilities to maintain operations unless the outbreak escalates. Nevertheless, Genting Singapore is taking this opportunity to accelerate the refurbishment programme of hotel rooms (up to 15-20% of room capacity) which usually takes place every 4-5years.
Wishing for government’s stimulus on tourism sector.
- In order to mitigate the impact and stimulate recovery in the tourism sector, we do not rule out the possibility of the government implementing a temporary cut on gaming duty as well as deferring the previous 50% casino entry levy hike attributed to local patronage.
Japan IR development bid to take centre stage in 2H20.
- Genting Singapore was one of three bidders shortlisted following Osaka’s request-for-concept (RFC) exercise and it submitted its RFC for Yokohama’s bid. It has a good chance of winning, given its investment bid of > S$10b. While our valuation has conservatively not imputed an option value, we guesstimate that clinching an IR concession could lift DCF by S$1.5b.
- Genting Singapore is also exploring securing a partnership with a local consortium to enhance their chances of winning the bids. Timeline-wise, Genting Singapore expects to submit its RFP in 3Q20, and the concession award to be announced in 4Q20.
Lucrative dividends a share price cushion.
- Given Genting Singapore’s ability to generate decent EBITDA, Genting Singapore raised their dividend payout and we deemed that it is sustainable at 4.0 S cents in 2020, representing decent prospective yields of 4.5% based on current Genting Singapore share price.
- Genting Singapore’s existing net cash of S$3.95b, combined with the expected cumulative net inflows of S$6.8b through 2025, is more than sufficient to fund annual dividends of 4.0 S cents, RWS’ planned S$4.5b capex and S$3.2b equity commitment (assuming 50% partnership stake) should it clinch a Japan IR concession.
- See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.
EARNINGS REVISION
- None, as we have already reduced our 2020 earnings forecast after imputing a half yearly impact from the virus outbreak.
Vincent Khoo CFA
UOB Kay Hian Research
|
Jack Goh
UOB Kay Hian
|
https://research.uobkayhian.com/
2020-02-13
SGX Stock
Analyst Report
0.950
SAME
0.950
