GENTING SINGAPORE LIMITED (SGX:G13)
Genting Singapore - Recovery Hinges On International Travellers
- Well-expected loss amid circuit breaker.
- Absence of dividend a disappointment.
- Breakeven unlikely without international traffic.
Genting Singapore's Negative EBITDA in 2Q not unexpected.
- Due to the circuit breaker in Singapore, RWS suspended operations since 6 April and has partially re-opened from 1 July. Gaming and non-gaming revenue declined 98% and 75% q/q respectively.
- With minimal traffic and revenue in 2Q, Genting Singapore (SGX:G13) recorded a loss of SGD85mn before interest, depreciation and amortisation (LBIDA) despite approximately 30% lower operating expenses compared to pre-crisis levels. As a result, it recorded a net loss of SGD163mn (1Q: net profit of SGD47mn), including a non-operating loss of SGD46.8mn (1Q: SGD6.6mn). This is in line with the broad travel and entertainment industry decline around the globe during the Apr-Jun period.
Absence of interim dividend is a disappointment.
- Given the uncertainty of the macro environment and recovery path, Genting Singapore did not declare an interim dividend in 1H20 (1H19: SGD0.015/share), despite its net cash position. While this is a rational business decision, it is likely a disappointment to the market.
- With COVID cases re-emerging around the globe along with economies re-opening, business normalisation might take longer than expected. We expect Genting Singapore to resume dividend payouts only when there is more visibility of a recovery, which might not be until early next year.
International travelers are key for EBITDA breakeven.
- Management’s tone on its outlook is cautious. International travelers accounted for 75-80% of total traffic to RWS pre-crisis and is therefore critical for breakeven. Although some business travel between China and Singapore has gradually resumed as the outbreak subsided, leisure travel might take longer to recover.
- Despite the pent-up demand from local traffic (20-25% of traffic pre-crisis), it is not enough as casinos can only open for loyalty members and social distancing measures limit capacity. Theme parks and attractions also must reopen along with casinos – therefore management believes it is unlikely to breakeven before international traffic resumes.
- Due to the longer-than-expected impact from the pandemic, we trimmed Genting Singapore’s FY20/21e EBITDA by 87%/40% and lowered our price target to SGD0.68 (from SGD0.83) which is based on 8x FY21 EV/EBITDA.
- See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2020-08-07
SGX Stock
Analyst Report
0.68
DOWN
0.830
