GENTING SINGAPORE LIMITED (SGX:G13)
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.
- We are lowering our target price for Genting Singapore slightly to S$0.95 from S$1.00 previously to reflect our negative earnings revision.
- Even though there is still some uncertainty surrounding Genting Singapore’s recovery trajectory, we believe that GENS is a solid vaccine recovery play as the Singapore market can comfortably sustain the company (at least S$100m in quarterly EBITDA) until tourists finally return.
- Genting Singapore's Share Price is currently trading at 10.2x EV/EBITDA (FY21F), around 0.6 standard deviations above its five-year average, reasonable considering that Genting Singapore is still in the nascent stages of recovery.
- Furthermore, Genting Singapore is inexpensive versus peers, priced at a massive ~60% discount to regional peers, who are trading at 26.6x EV/EBITDA (FY21F) on average.
- See
Jason SUM
DBS Group Research
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https://www.dbsvickers.com/
2021-05-10
SGX Stock
Analyst Report
0.95
DOWN
1.000
