Genting Singapore - Maybank Kim Eng 2020-03-18: This Too Shall Pass

GENTING SINGAPORE LIMITED (SGX:G13)

Genting Singapore - This Too Shall Pass

Genting Singapore (SGX:G13) announced an update on its 2020 outlook and warned that its 1Q20 and 6M20 earnings will be negatively impacted by the Covid-19 pandemic.
We cut our FY20 earnings estimate by 31% but left our long-term earnings estimates little changed and trimmed our EV/EBITDA- based Target Price to SGD0.84 from SGD0.99.

At 0.9x FY20E P/BV, Genting Singapore’s valuations are at new troughs. Investors who BUY now will be rewarded with high dividend yields of 6.5% pa while waiting for operations to recover.

Singapore has imposed entry restrictions due to the spread of the Covid-19 pandemic around the world.
On 2 Feb 2020, Singapore banned Chinese visitors.
On 17 Mar 2020, Singapore required ASEAN, Japanese, Swiss and British visitors to observe a 14-day self-quarantine.
On 18 Mar 2020, Malaysia banned its citizens from entering Singapore, even those entering by land, but only for two weeks.
We gather that the latter two developments will negatively impact RWS the most.

That leaves RWS with Singaporean citizens and permanent resident gamblers, whom we estimate accounted for 20-25% of FY19 GGR. Thus, Genting Singapore issued a profit guidance that it expects 1Q20 and 6M20 earnings to be negatively impacted vis-à-vis 1Q19 and 6M19 earnings.
To mitigate the negative impact of Covid-19, it reduced executives’ pay and directors’ fees but did not disclose the expected cost savings. Genting Singapore incurs staff costs of SGD500m-SGD550m pa.

Our previous FY20 earnings estimate was essentially based on RWS’ VIP and mass market gross gaming revenue (GGR) falling 70%/60% for three months. We now assume RWS’ VIP and mass market GGR will fall 70%/50% for six months (Fig1). The net impact of the above is to cut our FY20 earnings estimate by 31%.
Having said that, we leave our FY21 and FY22 earnings estimates little changed (FY21: +2%, FY22: +0%) as we expect the negative impact of Covid-19 to moderate by late-3Q20.

If Malaysia does not extend the outbound travel ban on its citizens, Malaysian visitors will trickle back to RWS from 1 Apr 2020. Our channel checks in Macau also indicate that China may ease outbound tourism curbs in Apr or May 2020 as the number of new Covid-19 cases there has plunged (16 Mar 2020: 29 new cases).
We estimate Chinese visitors accounted for 30-40% of RWS’ FY19 GGR. By then, we hope the investment community will cease cutting earnings estimates for Genting Singapore.

While we expect FY20E EPS to dip nearly 50% y-o-y, we maintain our annual DPS estimate at 4cents as we expect the EPS decline to be transient. Our annual DPS estimate of 4cents implies a manageable FY21 and FY22 DPR of 70-75%. Even though they imply FY20 DPR of 129%, Genting Singapore boasts a huge net cash pile of SGD3.7b or SGD0.31/share as at end-4Q19 that can finance any short-term shortfall in EPS relative to DPS.
At its current share price, Genting Singapore offers attractive dividend yields of 6.5% pa.

We ascribed an unchanged 7.8x FY20E EV/EBITDA, which is in line with -1 SD to the 10-year 12M forward EV/EBITDA mean. Even after we cut our FY20 EBITDA estimate by 20%, Genting Singapore is trading at < 5x FY20E EV/EBITDA.
It is also trading at 0.9x FY20 P/BV, a new trough since RWS opened in 1Q10. If operations recover, which we believe they will, there will be a lot of room for Genting Singapore’s valuations to re-rate.
See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.

Yin Shao Yang Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-03-18

SGX Stock Analyst Report BUY MAINTAIN BUY 0.84 DOWN 0.990