Genting Singapore - CGS-CIMB Research 2020-02-13: COVID-19 Headwinds In Short-Term But Good Long-Term Play

GENTING SINGAPORE LIMITED (SGX:G13)

Genting Singapore - COVID-19 Headwinds In Short-Term But Good Long-Term Play

While there will undeniably be short-term headwinds for the stock, we still like Genting Singapore (SGX:G13) for its longer-term prospects and net cash position, which allows it to sustain dividends moving ahead. We roll forward our valuation to end-FY21F.

Amidst the persistent regional economic uncertainty and competition, Genting Singapore’s adjusted EBITDA fell 3.3% y-o-y, led by the decline in gaming revenues (-3.5% y-o-y). However, adjusted EBITDA margins came in at 48% on lower-than-expected operational costs.
A welcome surprise was a final dividend of 2.5 Scts (2018: 2.0 Scts) that took full-year dividends to 4.0 Scts, ahead of 2019’s 3.5 Scts. Management hopes to continue rewarding shareholders.
Worthy to note is that Genting Singapore has paid down its debt and is currently sitting in a net cash position of S$3.7bn.

We estimate FY19’s VIP volumes fell c.2.8% y-o-y but with a higher win rate of 3.24% (vs. 2018: 3.03%); VIP GGR grew 4% y-o-y. We estimate Genting Singapore took c.45% of the Singapore VIP rolling chip volumes (vs. 2018: 48%).
Mass GGR is estimated to have fallen 10.1% y-o-y, with Genting Singapore taking a GGR market share of 37% in FY19 (vs. 2018: 39.3%), likely due to competition from regional markets and increase in local levies since Apr 19.

The Singapore Tourism Board (STB) projects a 25-30% drop in visitor arrivals in FY20F, sharper than the 19% contraction during the SARS outbreak. Genting Singapore also guided it was generally pessimistic about the outlook for 1H20F.
We bake in a revenue y-o-y decline of 10% for FY20F, which results in FY20F adjusted EBITDA falling by 15.8% y-o-y.
Overall, we reduce our FY20F EPS by 15.7% y-o-y. Our FY21F EBITDA is unchanged but net profit moves up 4.7% due to lower finance costs. FY22F adjusted EBITDA is introduced, featuring revenue growth of 2.9% and EBITDA margin of 45.6%.

Potential re-rating catalysts are higher gaming revenues and margins.
Downside risks are lower gaming revenues, higher trade receivable provisions and failure to secure any Japan opportunities.
See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.

RWS 2.0 is guided to be on schedule. Genting Singapore is looking to open its ‘Once A Pirate’, an immersive dining and performance concept themed on the adventures of Asian pirates, in late-2020.
The Maritime Experiential Museum should be closed by Mar 20 and will be renovated to become the new extension, the S.E.A. Aquarium. This is likely to be re-opened by end-2021F.

Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2020-02-13

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