Genting Singapore - DBS Research 2020-11-17: Normality Is Not Too Far Away


Genting Singapore - Normality Is Not Too Far Away

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  • Genting Singapore's 3Q20 adjusted EBITDA surpassed expectations due to massive pent-up demand from local crowd.
  • Recent positive news on COVID-19 vaccine development enhances visibility on earnings recovery.
  • Revised Genting Singapore's FY21F EBITDA forecast up by 31%; FY22F EBITDA now projected to be 92% of FY19A’s level.

Poised for the eventual return of tourism.

  • Genting Singapore (SGX:G13)’s outperformance in 3Q20 demonstrated the resilience of gaming demand, giving us confidence that the company can at least churn core EBITDA of S$75-100m on a quarterly basis in the absence of tourists.
  • Furthermore, recent successful breakthroughs on the COVID-19 vaccine front underpins our optimism on a swift turnaround in travel activity in 2H2021, and we now expect Genting Singapore's FY21F EBITDA to be at around 74% of 2019’s level.

GENS' adjusted EBITDA back into the black in 3Q20.

  • Genting Singapore reported 3Q20 adjusted EBITDA of S$149.0m (-46.4% y-o-y), a marked sequential improvement from 2Q20 (LBITDA of S$84.9m). This was particularly impressive despite the Jobs Support Scheme offsetting staff costs, given that attendance during the quarter was only limited to locals, which typically made up 20-25% of pre-COVID-19 total attendance.

Recent breakthroughs on vaccine development means that a resurgence in travel activity could be right around the corner.

  • Encouraging late-stage trial results released by Pfizer and BioNTech, and more recently Moderna on vaccine development, boast exceptionally high levels of efficacy (Pfizer - 90%, Moderna - 94.5%), which may boost acceptance and alleviate skepticism among the general population.
  • Furthermore, we are likely to receive more positive news soon, as there are at least 18 other COVID-19 vaccines that have entered the final stage of patient studies.
  • While there will certainly be daunting production constraints and distribution challenges to overcome, the successful development of multiple vaccines is certainly a promising step in the right direction.

Raise Genting Singapore's FY21F estimate by 31% and introduce FY22F EBITDA projections.

  • Accordingly, we now believe that a meaningful resumption of tourism activity could take place in 2H2021. Over the next one to two quarters, Singapore could potentially form more travel bubbles, following the start of the travel bubble between Singapore and Hong Kong, with other countries that have successfully contained the pandemic, including South Korea, Thailand and China.
  • Even if it takes longer than expected for attendance at RWS to revert to pre-COVID-19 levels, we anticipate that pent-up demand will drive a considerable boost in revenue per customer and temper the shortfall.

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Jason SUM DBS Group Research | https://www.dbsvickers.com/ 2020-11-17
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