GENTING SINGAPORE LIMITED (SGX:G13)
Genting Singapore - Write-Off 2020, Look Forward To 2021; Upgrade To BUY
- Genting Singapore (SGX:G13) issued a profit guidance – 1H20 results to be adversely impacted by the COVID-19 outbreak. While this could pose more downward pressure to share price in the near term, we see value at current prices as it has a strong war chest of SGD3.7bn to help to tide through this period.
- We expect earnings to rebound in FY21F once this epidemic blows over.
- Upgrade to BUY from Neutral with new Target Price of SGD0.64 from SGD0.85, 26% upside plus c.8% yield.
Profit guidance was expected.
- Genting Singapore highlighted that it has experienced a significant decrease in visitors across all its facilities. Our ground checks further suggest that the hotel industry occupancy rate is at c.30% given the recent drop in tourist arrivals.
- With the continuing spread of COVID-19 around the world, we now think travel restrictions are likely to be in place until sometime in July-August this year. But we do expect tourist arrivals and Genting Singapore’s revenue to recover sharply post 4Q20F on the back of pent-up demand.
Cost control measures in place.
- Genting Singapore is looking to streamline its workforce and improve productivity. It has effected cut on payrolls to reduce its fixed costs – non-executive directors’ fees are reduced by 15% for 1Q20, executive directors’ base salary reduced by 18% while base salary for managerial staff is lowered by 9-18%. Employees are encouraged to clear their annual leave or take no-pay leave during this period.
- Genting Singapore is also using this period to renovate its hotels and attractions to draw more visitors once the COVID-19 outbreak blows over.
Write-off 2020 but 2021 would make a comeback.
- We expect FY20F earnings to decline significantly as a result of the virus outbreak. We project the impact of COVID-19 to taper down sometime in August and tourism to recover in 4Q20. As such, we cut our topline by 44% in FY20F.
- With cost control measures in place, our FY20F EBITDA and PATMI fall by 57% and 86%. We raise FY21F-22F revenue by 4% and 2% due to more pent up demand. This in turn increases our FY21F-22F EBITDA by 10% and 7% and PATMI by 13% and 10%.
Value buy.
- Genting Singapore's share price has fallen 40% YTD, we now see value in the stock. Genting Singapore's cash stash of SGD3.7bn now represents c.60% of its market cap.
- See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.
- While earnings would be adversely impacted this year, on a normalised EBITDA basis, the group is now trading at 2-3x EV/EBITDA, which is at a record low level. We also expect FY21F earnings to recover.
- Meanwhile, its ample cash stash could more than support its near-term working capital needs, capex requirements, and still maintain its DPS of 4 SG cents.
- Our target price is based on 6x average FY20F-21F EV/EBITDA.
Juliana Cai
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-03-20
SGX Stock
Analyst Report
0.64
DOWN
0.850
