Genting Singapore - RHB Invest 2020-08-07: All Bets Off The Table; Downgrade To SELL


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%.

Juliana Cai RHB Securities Research | 2020-08-07
SGX Stock Analyst Report SELL DOWNGRADE NEUTRAL 0.62 DOWN 0.730