Genting Singapore - CGS-CIMB Research 2020-05-13: Weak 1Q20, But Maintain Longer-Term View


Genting Singapore - Weak 1Q20, But Maintain Longer-Term View

  • Genting Singapore's 1Q20 adjusted EBITDA of S$146m was below, at 22.5% of our FY20F forecast (S$652m), but in line at 28% of consensus’ S$518m.
  • 2Q/FY20F is likely to be significantly impacted by the many lockdowns since Apr 20. We cut our FY20F adj. EBITDA by 25.7% but maintain FY21-22F.
  • We still like Genting Singapore’s longer-term prospects. Reiterate ADD, with unchanged Target Price, based on 7x CY21F EV/EBITDA (close to -1 s.d. below mean).

Genting Singapore - 1Q20 weak

  • Genting Singapore (SGX:G13) released its 1Q20 operations update. It achieved a 1Q20 revenue of S$406.9m (-36.5% y-o-y), led by declines in gaming revenue (-37.7% y-o-y) and non-gaming revenue (-33.8% y-o-y).
  • While the decline in gaming revenue had been within our expectations, the fall in non-gaming revenue was slightly worse than expected, while the fall in adjusted EBITDA to S$146m (-55.4% y-o-y) was more than expected, likely due to higher-than-expected expenses.

Ops suspension due to circuit breaker till end-May

  • Back in Mar 20, Genting Singapore had already guided that its 1Q20F/1H20F financial results would be significantly and adversely impacted, on the back of a significant decrease in visitors and, correspondingly, revenue across all of its facilities.
  • Following the Singapore Government’s announcement of stricter circuit breaker measures on 3 Apr, Genting Singapore suspended almost all operations at RWS. The circuit breaker period was subsequently extended by another four weeks till end-May 20.

Lower FY20F adjusted EBITDA

  • Given the lower-than-expected 1Q20 earnings, we cut our FY20F revenue by 11% as we now think mass gaming gross gaming revenue (GGR) could fall by c.53% y-o-y (vs. 40% previously); leading to gaming revenue falling 50.9% (vs. 45.3% previously).
  • We also expect non-gaming revenue to fall by c.39% y-o-y (vs. 30% previously). We raise expenses as a % of sales to 95% (vs. 82.6% previously) but include c.S$35m worth of wage support payouts that we estimate Genting Singapore could receive during the circuit breaker months.
  • All in, our changes result in FY20F adjusted EBITDA falling by 25.7% to S$485m (-c.59% y-o-y). We have left our FY21-22F EPS relatively unchanged as we believe tourism in Singapore could rebound from 2021 onwards.

Reiterate ADD on its longer-term prospects

Cezzane SEE CGS-CIMB Research | 2020-05-13
SGX Stock Analyst Report ADD MAINTAIN ADD 0.760 SAME 0.760