Genting Singapore - Maybank Kim Eng 2020-05-14: Buy For The Cheap Valuations, Stay For The Dividend Yields


Genting Singapore - Buy For The Cheap Valuations, Stay For The Dividend Yields

Maintain BUY with a lower Target Price of SGD0.81 (-4%)

  • Genting Singapore (SGX:G13)'s 1Q20 results missed our expectations and 2Q20 will likely be worse. That said, we believe that future quarters beyond 2Q20 will be better as the Covid-19 pandemic is easing.
  • We slash FY20E earnings by 87% and trim FY21E/FY22E by 5% each; we maintain DPS estimates to offer > 5% yields p.a. At 1.2x FY20E P/BV, Genting Singapore’s valuations are not expensive.
  • We cut our Target Price to SGD0.81 from SGD0.84 as we switch valuation methodology to DCF from EV/EBITDA, incorporating a gradual recovery phase from 2H20.

1Q20 revenue & EBITDA below our expectations

  • Genting Singapore's 1Q20 EBITDA of SGD146.9m (-55% y-o-y, -49% q-o-q) accounted for only 19% of our FY estimate. 1Q20 revenue of SGD406.9m (-36% y-o-y, -33% q-o-q) also fell short at 21% of our FY estimate.
  • Genting Singapore’s quarterly business update to SGX did not disclose 1Q20 core net profit nor provide gaming statistics to explain in detail why 1Q20 revenue and EBITDA were lower y-o-y. See Genting Singapore Announcements. That said, we gather that 1Q20 VIP win rate could have been below the theoretical range of 2.7-3.0% given the low 1Q20 EBITDA margin of 36%.

Rest of FY20 will not be easy

  • Due to Singapore’s Circuit Breaker, Resort World Sentosa (RWS) has been shut since 6 Apr until 1 Jun 2020. Even when RWS reopens, we believe that visitation will need time to ramp up due to social distancing measures and Singaporean borders remaining closed to most tourists.
  • As a consolation, RWS will receive a property tax rebate of 60% which we quantify at ~SGD23m for FY20E and 25-75% wage setoff for every local worker capped at SGD4.6k/month for 9 months which we quantify at SGD60m-SGD180m.

Expect only breakeven this year but DPS unchanged

  • As the number of new Covid-19 cases in Singapore and Malaysia (a key market for RWS) ease, we expect visitors to gradually return. We cut our FY20E total GGR estimate by 33% to account for the two month closure and trim our FY21E/FY22E total GGR estimate by a modest 2%.
  • Coupled with the property tax rebate and wage setoff of SGD120m for FY20E, we slash FY20E earnings estimate by 87% and lower FY21E/FY22E by 5% p.a. (See Fig4 in attached PDF report for major assumptions and estimates).
  • Our DPS estimates of SGD0.04 p.a. are unchanged due to its solid end-FY19 net cash position of SGD0.31/sh.

Revised valuation methodology and TP

Yin Shao Yang Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-05-14
SGX Stock Analyst Report BUY MAINTAIN BUY 0.81 DOWN 0.840