Gaming – Singapore - UOB Kay Hian 2020-10-22: MBS Reports Its 3Q20 Results; Some Glimmer At The End Of The Tunnel

SGinvestors.io

GENTING SINGAPORE LIMITED (SGX:G13)

Gaming – Singapore - MBS Reports Its 3Q20 Results; Some Glimmer At The End Of The Tunnel

• While Las Vegas Sands’ 3Q20 results predictably revealed a weak quarter for Marina Bay Sands (revenue plunged by > 65% y-o-y), Marina Bay Sands’s gaming revenues surprisingly recovered sharply q-o-q to around one-third of pre-pandemic levels despite the fact that Singapore’s borders remained effectively shut.
• Positive glimmers of hope are emerging as the Singapore government mulls border relaxation and the creation of bilateral travel bubbles. Maintain MARKET WEIGHT on the sector and HOLD on Genting Singapore (SGX:G13).

Marina Bay Sands: Delivers positive EBITDA with better-than-expected local baseline patronage.

• Las Vegas Sands’ (LVS) 3Q20 results revealed that Marina Bay Sands’ (MBS) adjusted EBITDA fell 84% y-o-y but surprisingly recovered into a positive US$70m (hold-normalised adjusted EBITDA declined 85% y-o-y to US$59m). 3Q20’s GGR (Gross Gaming Revenue) recovered close to one-third of pre-pandemic levels, with the mass market gaming revenues recovering to about 50% of 2H19’s run rate, and we surmise that the local baseline patronage could have been significantly better than originally thought.
• On a constant currency basis (in Singapore dollars), 3Q20’s mass market (table and slot) gross gaming revenue (GGR) shrank 53% y-o-y, while VIP GGR declined 78% y-o-y. Mass:VIP GGR mix for tables (ie excluding slots) stood at 55%:45% in 3Q20 (2Q20: 70%:30%, 3Q19: 47%:53%).
• MBS’ 3Q20 EBITDA margin fell to 24.9% (2Q20: -491.3%, 3Q19: +54.9%).

VIP: RCV recovered from historical low but still exhibited a steep y-o-y drop.

• On a constant currency basis, we estimate MBS' 3Q20 RCV (Rolling Chip Volume) plunged 80% y-o-y, mainly due to the Singapore’s border closure and travel impediments that largely reduced international tourist patronage. The stronger RCV coupled with a higher win rate of 4.23% in 3Q20 (2Q20: 1.91%) resulted in GGR increasing 2511% q-o-q. Meanwhile, RCV fell 79.7% y-o-y. Despite a higher y-o-y win rate of 4.23% (3Q19: 3.98%), VIP GGR fell 78.4% y-o-y in 3Q20.

Mass market: A decent baseline buffered by slot revenue.

• In Singapore dollars, we estimate mass market non-rolling volume rose 1540% q-o-q from a low base in 2Q20. 3Q20 non-rolling volume fell 70.4% y-o-y, while slot handle plunged 24.5% y-o-y. With a much lower volume coupled with a slightly lower win rate of 17.8% (2Q20: 22.2%, 3Q19: 18.0%), mass table GGR declined 70.7% y-o-y while slot GGR plunged 22.8% y-o-y in 3Q20. Hence, overall mass market GGR fell 52.7% y-o-y on weaker mass table GGR and slot GGR.

Resorts World Sentosa: Expecting gradual recovery but unlikely to be a profitable quarter.

• While Resorts World Sentosa (RWS) has recommenced its operation in July after a prolonged lockdown, RWS may not benefit as strongly as MBS’ q-o-q rebound, given the two integrated resorts’ different business dynamics and appeal. We remain cautious on its 2H20 outlook due to lingering uncertainty that visitors and earnings would plummet y-o-y and take time to normalise.
• Furthermore, with only partial reopening of non-gaming facilities such as Universal Studios Singapore and S.E.A Aquarium, and reduced gaming capacity in the casino, we believe that RWS will continue to incur EBITDA losses in 3Q20, although there is some buffer from the government’s incentives (Jobs Support Schemes and property tax rebate).

Maintain MARKET WEIGHT; better recovery in 4Q20 with partial reopening of borders.

• Given the Singapore gaming industry’s high reliance on foreign travellers, main catalysts that will escalate earnings recovery are:
  1. relaxation of borders restriction;
  2. travel bubbles; or
  3. a vaccine discovery.
• Otherwise, the near-term earnings will remain blemished due to depressing patronage, stringent social distancing set-ups and limitations of gaming capacity at 25% which largely stifle gaming volumes.
• Maintain HOLD on Genting Singapore (SGX:G13). Our S$0.69 target price implies 6x 2021F EV/EBITDA (-2SD w mean).
• See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.

Vincent Khoo CFA UOB Kay Hian Research | Jack Goh Tooan Orng UOB Kay Hian | https://research.uobkayhian.com/ 2020-10-22

SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.690 SAME 0.690