Genting Singapore - OCBC Investment 2020-05-18: Surviving The Crisis

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GENTING SINGAPORE LIMITED (SGX:G13)

Genting Singapore - Surviving The Crisis

• Genting Singapore's 1Q20 EBITDA -55% y-o-y on COVID-19.
• 2Q could be worse on extended circuit breaker, but not a surprise.
• Solid balance sheet to survive the extended closures.

Genting Singapore's 1Q20 EBITDA -55%

• As a result of the sharp drop in traffic amid COVID-19, Genting Singapore (SGX:G13)’s revenue -36% y-o-y or -33% q-o-q to SGD407mn in 1Q20. This is largely in line with expectations as the outbreak has intensified outside of China from March. EBITDA fell more at 55% y-o-y or -49% q-o-q to SGD147mn on operating deleverage.
• Compared to Marina Bay Sands’ 35% y-o-y drop in EBITDA, we attribute Genting Singapore’s worse decline to its higher exposure to lower margin non-gaming business.

Extended circuit breaker likely to scrap 2Q earnings

• As COVID-19 developed into a global pandemic, the Singapore government announced the implementation of the circuit breaker from 7 April to 4 May, which later was extended to 1 June 2020. Although the outbreak shows signs of subsiding around the globe, timing of reopening remains uncertain and is likely to be in phases. Fly-in tourists could take an even longer time to normalise. It raises the possibility of Genting Singapore reporting negative EBITDA in 2Q on minimal revenue.

Strong balance sheet can help weather the crisis

• Despite a worse than expected decline in 1Q20, a net loss in 2Q may not surprise the market given the implementation of the circuit breaker.
• In 2019, Genting Singapore incurred SGD1.1bn in operating and financing expenses. With SGD3.7bn net cash on hand (or SGD0.31/share) as of 31 Dec 2019, Genting Singapore is well positioned to survive the extended closure.

Government support offers some assurance

• Despite limited visibility of a potential normalisation, we think the government’s efforts to support employment and corporates offer some assurance to the market. We forecast GGR to fall 60% y-o-y in 1H20 and narrow to -20% y-o-y in 2H. However, we maintain the fair value estimate of SGD0.83 for now given the limited information from its 1Q update.
• See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.
• Genting Singapore is trading at 5.1x 2021 EV/EBITDA on refinitiv consensus earnings estimate, which is lower than 1-s.d. below historical average. The recovery pace in Singapore is likely to be slower than Macau given
  1. COVID-19 is till ongoing,
  2. more fly-in tourist exposure, and
  3. more leisure players in Singapore.
• However, as the stock has been trading the cheapest in the region and unlikely to see a more drastic development than a complete shutdown, Genting Singapore's share price has likely bottomed.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2020-05-18

SGX Stock Analyst Report BUY MAINTAIN BUY 0.83 DOWN 1.000