Genting Singapore - CGS-CIMB Research 2020-11-16: 3Q20 A Strong Suit; Likely Better Times Ahead

GENTING SINGAPORE LIMITED (SGX:G13)

Genting Singapore - 3Q20 A Strong Suit; Likely Better Times Ahead

Genting Singapore's 9M20 adjusted EBITDA of S$215.7m beat our and consensus FY20F forecasts of S$108m and S$115.3m, respectively, on higher-than-expected 3Q EBITDA.
3Q20 adjusted EBITDA of S$149m, although down 46.4% y-o-y, was significantly above our expectations of a slight EBITDA loss.
We remain positive. Reiterate ADD on Genting Singapore, with a higher Target Price of S$0.86, still based on 8.5x (close to 0.5 s.d. below mean) but rolled over to CY22F EV/EBITDA.

Genting Singapore (SGX:G13)'s 3Q20 revenue of S$301m (-49.5% y-o-y) was a significant sequential improvement from 2Q20’s revenue of S$41.3m.
While we had forecast some increase in gaming revenues as casinos have been allowed to open since 1 July, the higher gaming revenues of S$212.9m (vs. 2Q20’s S$6.5m) took us by surprise by being close to 1Q20’s gaming revenue of S$267.9m.
Genting Singapore's 9M20 revenue of S$749.2m (-c.60% y-o-y) was ahead at c.89% of our FY20F forecast of S$840m.

Genting Singapore's 3Q20 adjusted EBITDA of S$149m was strong sequentially (vs. 2Q20’s loss of S$84.9m), with 3Q20 adjusted EBITDA margin of 49.5%. We suspect this was due to the significant cost containments and potentially higher-margin mass gaming business in this quarter.
3Q20 adjusted EBITDA took 9M20 adjusted EBITDA to S$215m (-76.1% y-o-y), exceeding our FY20F adjusted EBITDA forecast of S$108m.

Genting Singapore's prospects could improve further in 4Q20F with Singapore gradually re-opening and the government advocating local tourism. We expect Genting Singapore to report 4Q20F revenue of at least S$307.4m (as pent-up demand could have lifted 3Q20’s gaming revenue, we pencil in a 10% q-o-q discount to 4Q20’s gaming revenues; we also expect non-gaming revenue to fall 60% y-o-y in 4Q20F).
We forecast an adj. EBITDA margin of 45%, which takes our 4Q20F adj. EBITDA to c.S$138m. Hence, we lift our FY20F adj. EBITDA to S$354m (vs. S$108m previously), and our FY20F core net profit to S$88m (up + > 100% from previous estimates). Our FY21-22F adj. EBITDA and net profit assumptions are relatively unchanged.

Genting Singapore’s further recovery is contingent on the return of tourists, the timeline for which is uncertain. However, we think its strong balance sheet (net cash position of S$3.4bn as at end-Jun 20) will tide it through tough times while its position as one of only two casinos in Singapore underscores its importance to Singapore tourism.
We reiterate our ADD call and raise our 12-month Target Price to S$0.86 (from S$0.73) on an unchanged 8.5x EV/EBITDA (close to 0.5 s.d. below long-term mean) but now on FY22F valuations.
See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.
Potential re-rating catalysts include a quicker recovery in Singapore’s tourism.
Downside risks are slower-than-expected recovery in Singapore’s tourism and no dividends.

Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-16

SGX Stock Analyst Report ADD MAINTAIN ADD 0.86 UP 0.730