Genting Singapore - CGS-CIMB Research 2020-08-07: A Tough Year. Only For Longer-Term Investors


Genting Singapore - A Tough Year. Only For Longer-Term Investors

  • Genting Singapore's 1H20 adjusted EBITDA of S$66m was below at 19%/16.8% of our/consensus (S$350m/S$397m) FY20F forecasts, on higher-than-expected expenses.
  • Unfortunately, no interim dividend was declared, below our expectations.
  • We lower FY20-22F EBITDA forecasts on higher expenses and slower growth.
  • Maintain ADD, as we take respite in Genting Singapore’s cash pile but lower 12-month Target Price to S$0.73, still on 8.5x CY21F EV/EBITDA (close to 0.5 s.d. below mean).

Adjusted EBITDA down 89.3%

  • Genting Singapore (SGX:G13)'s 1H20 revenues fell 64.9% y-o-y to S$448.2m on the back of the slowdown in visitor arrivals since Feb 20 and temporary cessation of business from 7 Apr 2020. See Genting Singapore Announcements.
  • While the revenue slowdown was expected, higher-than-expected expenses and one-off impairments resulted in adjusted EBITDA falling 89.3% y-o-y to S$66m, implying EBITDA margins of 14.9%, below our 1H20 expectations.

No interim dividend; but hopeful for a final dividend

  • Genting Singapore mentioned that it decided not to declare an interim dividend considering the ongoing severity and uncertainty of the impact of the COVID-19 pandemic. However, barring any unforeseen circumstances, it has intentions to declare a final dividend.
  • We maintain FY20F DPS for now. See Genting Singapore Dividend History.

Near-term outlook weak, trim FY20-21F EBITDA

  • Genting Singapore remains pessimistic on FY20F as global travel remains highly restrictive in the near-term and Singapore is currently closed to tourists. As such, we cut FY20F revenue by 20%. However, we cut our FY20F EBITDA by 69.1% to S$108.4m as we now think that Genting Singapore will be unable to lower its expenses significantly for the rest of the year.
  • For FY21-22F we introduce revenue cuts of 7.5% and 6.3%, respectively, as we believe gaming could take some time to recover. This, coupled with some increased expenses, leads us to reduce our FY21-22F EBITDA by 13.2% and 6.5%, respectively.
  • Poor topline takes our FY20F EPS into a loss position, while cuts to our FY21-22F revenue and EBITDA reduce our FY21-22F EPS by 17% and 7% respectively.

RWS 2.0 and Japan opportunities

  • Management mentioned that the timeline of RWS 2.0 will be impacted by design changes due to safety management requirements and disruptions to the construction industry and global supply chain caused by the pandemic. Genting Singapore also thinks that the new design changes will need to incorporate health and safety measures due to COVID-19.
  • For Japan, Genting Singapore has participated in the Request-for-Concept (RFC) by Yokohama City and will continue to monitor the developments in anticipation of the launch of Request-for-Proposal (RFP) in 2H20.

Reiterate ADD on Genting Singapore, but only for longer-term investors

Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2020-08-07
SGX Stock Analyst Report ADD MAINTAIN ADD 0.73 DOWN 0.840