Genting Singapore 4Q20 - UOB Kay Hian 2021-02-10: A Key Proxy For Reopening Play

GENTING SINGAPORE LIMITED (SGX:G13)

Genting Singapore 4Q20 - A Key Proxy For Reopening Play

Genting Singapore’s 4Q20 results largely met our expectations, featuring another resilient quarter of gaming revenue and an EBITDA recovery which was well ahead of rival Marina Bay Sands’ (MBS). While the final dividend was somewhat disappointing, and the company’s steadfast interest in Japan’s IR concession provides an element of uncertainty, the overriding catalyst continues to be eventual economic reopening with the region’s dispensation of COVID-19 vaccine.
Maintain BUY. Target: S$1.08.

Genting Singapore (SGX:G13)’s 4Q20 results revealed that Resort World Sentosa’s (RWS) gaming revenue and EBITDA recovered 3% and 77% q-o-q to S$213m and S$77m respectively, significantly beating consensus’ expectations.
While revenue and EBITDA plunged 48% and 20% y-o-y respectively, the figures were more resilient than Marina Bay Sands’ 60% and 68% y-o-y plunge in revenue and EBITDA.
Genting Singapore’s 4Q20’s consensus-beating EBITDA partially reflects a reversal of provision of gaming receivables and also the benefit of various government subsidies, although the quantum of both items is unspecified.

We estimate that Resort World Sentosa’s market share in terms of Singapore’s gaming revenue rose to 44% in 2H20, increasing significantly from 4Q19’s 37-38% level.

Genting Singapore declared a 1 S cent final DPS (4Q19: 2.5 cents), implying a full-year yield of 1.1%.
Recall that Genting Singapore did not declare any interim dividend in the previous quarters this year (2Q19: 1.5 cents), mainly due to operational losses in 1H20.

Despite international borders remaining sealed in 4Q20 and limited gaming capacity due to stringent social distancing set-ups, Resort World Sentosa’s gaming volume recovered by 2.8% q-o-q to about two-thirds of the pre-pandemic level. The recovery was mostly driven by the local market (mass and premium mass segments), and we understand that the VIP win rate was within the theoretical range.
With the impressive GGR recovery, Resort World Sentosa has regained market leadership in the Singapore gaming market for the first time in many years, wresting the pole position from the more foreign patron dependent Marina Bay Sands.

Due to absence of foreign tourists, strict standard operating procedures (SOP) and largely reduced capacity, Genting Singapore’s non-gaming revenue plummeted 61% y-o-y in 4Q20. Positively, non-gaming revenue recovered 42% q-o-q on the back of attractive staycation packages and the S$320m SingaporeRediscovers vouchers set aside by the government which largely boosted patronage during the school holidays. However from hereon, the non-gaming segment would take a longer time to recover with the absence of travellers from neighbouring countries, unless meaningful travel bubbles or partial borders reopening are implemented.

The first shipment of the Pfizer-BioNTech’s vaccines arrived Singapore in December last year, and more vaccines including Moderna’s and Sinovac’s are expected to arrive in the coming few months. This would eventually allow the government to achieve its plan to inoculate 5.7m citizens by 3Q21.
With the World Health Organization (WHO)-endorsed vaccines widely dispensed in the country by 3Q21, the market will be more confident that the pandemic will be under control, which will allow the gradual reopening of borders.

Singapore’s government earlier announced that it has halted reciprocal green lane (RGL) coronavirus travel arrangements with Malaysia, Germany, South Korea for three months effective from February due to the rising number of COVID-19 cases in the respective nations. Currently, Singapore has implemented travel arrangements with several neighbouring countries, including:
1. unilateral borders opening to Brunei, New Zealand, Vietnam, Australia and China; and
2. green lane arrangements for essential purposes with Japan, Indonesia, and China.
Nevertheless, with these nations’ vaccination tally potentially exceeding confirmed cases in the coming few months and achieving herd immunity, we expect Singapore’s authority to initiate more travel arrangements, which will eventually benefit Genting Singapore as inbound travellers will rebound.

Recall that Resort World Sentosa had committed to the Singapore government to spend S$4.5b over five years to elevate the resort’s vibrancy. New attractions have been planned yearly for 2020-25.

Genting Singapore continues to express interest in Japan’s integrated resort (IR) concession in which the investment community remains wary of, given the high capex commitment and Japan regulators’ overly stringent regulatory framework (eg short concession period of five years) which have caused the withdrawals of most US bidders such as Las Vegas Sands.
While the bidding process has inched forward with media reports highlighting Yokohama’s Request for Proposal (RFP) on 21 Jan, the process may still take a while to reach its finality.

Maintain BUY with target price of S$1.08 for Genting Singapore which implies +0.5SD above mean, at 11x 2021F EV/EBITDA, partially factoring in a strong earnings recovery in 2022. Our target price could be as high as S$1.30 if we roll valuation to 2022 and normalise (reduce) our valuation to mean EV/EBITDA of 10x.
See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.
Our optimistic valuation assumes Genting Singapore’s Japan IR bid would not materialise. Meanwhile, Genting Singapore provides a prospective dividend yield of 4.7%.

Vincent Khoo CFA UOB Kay Hian Research | Jack Goh Tooan Orng UOB Kay Hian | https://research.uobkayhian.com/ 2021-02-10

SGX Stock Analyst Report BUY MAINTAIN BUY 1.080 SAME 1.080