GENTING SINGAPORE LIMITED (SGX:G13)
Genting Singapore - All Bets Off The Table; Downgrade To SELL
- Genting Singapore (SGX:G13)'s 2Q20 losses were in line with expectations. Due to the temporary closure during the Circuit Breaker (CB) period, 2Q20 revenue plunged 94% y-o-y to SGD41m. As a result, adjusted EBITDA went into the red at -SGD85m, and the group reported a loss of SGD163m. See Genting Singapore Announcements.
- No dividend was declared for 1H20.
- We think Genting Singapore's outlook remains pessimistic so long as mass travel does not resume.
Severely impacted by COVID-19.
- The temporary closure of most of Resort World Sentosa’s (RWS) businesses during the CB resulted in negligible revenue recorded for the quarter. While Genting Singapore reopened its attractions on 1 Jul, management highlighted that local visitors only make up 20-25% of the attractions’ visitors.
- Even with the ongoing cost-cutting measures, management expects the non-gaming business to be underwater if mass tourism is prohibited.
- Meanwhile, the casino is operating at a physical capacity of 50% due to safe distancing measures. However, the actual patron load is much lower as entry is currently limited to existing Genting Rewards Members and Annual Levy Holders.
A long drawn battle.
- We think we were too early in upgrading the stock in our previous report. The International Air Transport Association (IATA) forecasts that international travel would only return to pre-COVID-19 levels in 2024.
- In Singapore, while the case numbers in the community are stable, mass travel does not look to resume by the end of the year given that Singapore is still in its Phase 2 of reopening. Attractions are limited to 25% operating capacity while pubs and clubs remain closed.
- Furthermore, although Singapore has set up green lanes for essential business and official travel with China and Malaysia, corporate travel is likely to remain prudent amid the economic challenges.
- Lastly, the resurgence of COVID-19 cases in the region further suggests that the road to recovery could be bumpy, with restrictions tightening again if the number of cases spike.
We cut our FY20-22F earnings by 3.5x, 57% and 14%.
- We now expect the year to end in losses and adjusted EBITDA at around breakeven level. We project FY21F revenue to be at 60% of pre-COVID-19 levels (previously 90%), with slower and more selected reopening of borders during the year.
- We also cut the total dividend to S$0.02 since the board still has intentions for a final dividend. See Genting Singapore Dividend History.
- Given the expected losses in FY20F, low earnings visibility in FY21F and uncertainty of recovery, we downgrade Genting Singapore to SELL.
- We now peg our Target Price to 1x FY21F P/B (SGD0.62) as the group has a strong balance sheet that could help to limit downside. Our Target Price translates to 8x FY21F 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.
- Development of vaccines as well as a faster and smoother reopening of borders would be key upside risks to our call.
Juliana Cai
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-08-07
SGX Stock
Analyst Report
0.62
DOWN
0.730
