Genting Singapore - DBS Research 2021-05-10: Value Narrative Intact


Genting Singapore - Value Narrative Intact

  • Genting Singapore's 1Q21 results slightly below expectations.
  • Negative earnings revision to reflect more gradual return of tourists and recently implemented COVID-19 measures.
  • Valuation more attractive against regional peers after recent pullback in Genting Singapore's share price.
  • Maintain BUY; target price lowered to S$0.95 as we cut our FY21/22F EBITDA estimates by 17%/12%.

Genting Singapore's 1Q21 EBITDA of S$128.1m missed expectations slightly

  • Genting Singapore (SGX:G13)'s 1Q21 EBITDA of S$128.1m missed expectations slightly, representing 17.3% of consensus’ full-year estimate.
  • Not much information was shared by Genting Singapore in its quarterly update, but we believe that underperformance during the quarter can largely be attributed to a 28.5% sequential decline in non-gaming revenue and normalisation of its VIP win rate (Genting Singapore’s VIP win rate was around 3.6% in 2H20, up substantially from the long-term average of 2.9%).
  • 1Q21 is the last quarter that Genting Singapore will be receiving subsidies as part of the JSS scheme, but the impact to its earnings going forward should be manageable given that the company was only eligible for the second lowest tier of subsidies (10% in Jan-Mar 21).

Reduce FY21F/22F EBITDA estimates by 17%/12%.

  • We pencilled in a more moderate pace of recovery in VIP and mass gaming volumes, and lower visitors to its non-gaming attractions to factor in a more gradual return in tourists and tighter COVID-19 measures domestically.
  • Although Singapore has been making solid progress on vaccinations, the progress at other important source countries for inbound tourism is still sluggish, which could delay the implementation of travel bubbles and access to vaccine passports.
  • Operating capacities at attractions like Universal Studio and the Marine Life Park will be reduced to 50% (65% previously) from 8 May to 30 May amid the recent rise in community cases. While there may not be any direct impact to Genting Singapore as the company has been operating well below the previous capacity limit, we believe that its non-gaming revenue could suffer from a lower frequency of visits from the local market.
  • Naturally, an extension of existing COVID-19 measures, or introduction of stricter restrictions could lead to earnings downside.

Value narrative intact, recovery delayed but not disrupted; maintain BUY with lower target price of S$0.95.

Jason SUM DBS Group Research | https://www.dbsvickers.com/ 2021-05-10
SGX Stock Analyst Report BUY MAINTAIN BUY 0.95 DOWN 1.000