GENTING SINGAPORE LIMITED (SGX:G13)
Genting Singapore - Receives A Major Lifeline
Maintain BUY and SGD0.84 Price Target
- Resort World Sentosa (RWS) will receive property tax rebates and be paid wage setoffs. We estimate that Genting Singapore (SGX:G13) stands to save SGD83m-SGD203m in FY20. These account for a very helpful 22%-54% of our FY20 earnings estimates which were lowered recently - see report Genting Singapore - Maybank Kim Eng 2020-03-18: This Too Shall Pass, to impute weak revenue due to the COVID-19 pandemic.
- Our earnings estimates, BUY call and SGD0.84 EV/EBITDA based Target Price are unchanged for now.
- We continue to like Genting Singapore for its high dividend yields (6.5% p.a.) and cheap valuations (0.9x FY20E P/BV).
To receive property tax rebates and wage setoffs
- Today, Deputy Prime Minister of Singapore Heng Swee Keat delivered a ‘Resilience Budget’ to aid those affected by the COVID-19 pandemic. Two measures impact RWS -
- property tax rebate for integrated resorts will be raised to 60% from 10%; and
- Government Of Singapore will pay companies 25% (general) or 75% (tourism) of monthly wages for every local worker capped at SGD4.6k each for 9 months till end-2020.
- We estimate the 60% property tax rebate will save Genting Singapore SGD22.9m in FY20.
Treatment of wage set off unclear at this juncture
- In FY18, Genting Singapore paid salaries of SGD456.7m to ~13k employees. This translates into average salary per employee of ~SGD2.9k/month. That said, ‘Integrated Resort’ does not appear to be categorized under 'tourism' in the relevant annexure of the Resilience Budget (link). Thus, Genting Singapore may receive 75% wage set off for its hotels and theme park workers but just 25% for its casino workers.
- We understand that locals account for ~70% of Genting Singapore’s ~13k employees (legal minimum: 65%).
- See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.
FY20 cost savings will be substantial, nonetheless
- Assuming Genting Singapore receives the minimum 25% wage set off for ~70% of its ~13k employees, we estimate this will save Genting Singapore SGD60m in FY20. Coupled with the 60% property tax rebate, the total cost savings of ~SGD83m is a punchy 22% of our FY20 core net profit forecast.
- Assuming Genting Singapore receives the maximum 75% wage set off for ~70% of its ~13k employees, we estimate that this will save Genting Singapore a whopping SGD180m in FY20. Coupled with the 60% property tax rebate, the total cost savings of ~SGD203m is a whopping 54% of our FY20 core net profit forecast.
Yin Shao Yang
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2020-03-26
SGX Stock
Analyst Report
0.840
SAME
0.840
