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


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.

A tougher year but with higher dividends

  • 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.

VIP GGR up on win rate; mass GGR heads down

  • 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.

Covid-19 outbreak a short-term risk; cut FY20F EBITDA

  • 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%.

Maintain ADD on attractive valuations

RWS 2.0 update

  • 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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