Genting Singapore - UOB Kay Hian 2021-08-13: 2Q21 Q-o-q Improvement Despite COVID-19 Miseries, Major Recovery In Sight

GENTING SINGAPORE LIMITED (SGX:G13)

Genting Singapore - 2Q21 Q-o-q Improvement Despite COVID-19 Miseries, Major Recovery In Sight

Genting Singapore’s 2Q21 results came in above our expectation despite lower operating capacity as Singapore returned to Phase 2 (Heightened Alert) of the country’s circuit breaker.
Positively, Genting Singapore delivered a stronger q-o-q EBITDA despite flattish revenue, outperforming rival Marina Bay Sands (EBITDA -22% q-o-q).
We expect Genting Singapore to generate meaningful capital appreciation until 2022, with Singapore’s resilient vaccination pace navigating the direction towards achieving herd immunity by September. Target price: S$1.08.

Genting Singapore (SGX:G13)’s (GENS) 2Q21 results revealed that Resort World Sentosa’s (RWS) gaming revenue increased marginally (+4.2% q-o-q) from 1Q21, outperforming rival Marina Bay Sands’ (MBS) q-o-q gaming revenue decline of 22%.
Genting Singapore also reported adjusted EBITDA of S$158m (+286% y-o-y; +34% q-o-q) in 2Q21. 1H21 EBITDA represented about 43% of our full-year forecasts.
In 1H21, there was also a S$24.7m reversal on impairment due to casino debtors’ repayment. Note that the y-o-y comparison is not meaningful as Genting Singapore operated for only one week in 2Q20.

We deem Genting Singapore’s 2Q21 results as exceptional, given the group’s ability to sustain q-o-q flattish gaming revenue and stronger EBITDA despite reduction of operating capacity (from 65% to 50%) as Singapore returned to Phase 2 (Heightened Alert) in the quarter. This was largely supported by resilient local patronage as international footfall remained absent without meaningful border relaxations.

Disappointingly, Genting Singapore did not declare any interim dividend in 2Q21 due to the impacts of the COVID-19 pandemic, similar to 2Q20.

Stellar vaccination rate pushing towards normalcy restoration deep-rooted resistances. In June, Yokohama announced that Genting Singapore and Melco Resorts passed the qualification screening process to participate in the city’s Request for Proposal (RFP) to develop an integrated resort (IR). Nevertheless, the project is facing locals’ opposition due to widespread concerns about a rise in gambling addiction and negative social impacts. Resident groups opposing the bid are also launching petition campaigns, rallying behind mayoral candidates who will oppose an IR in the upcoming elections (22 Aug).
Genting Singapore’s management highlighted that Yokohama’s city award of the IR can be as early as next month. We maintain our view that Genting Singapore’s pursuit of its Japan IR licence with high capex commitment, short windows term and stringent regulatory framework is viewed as a negative.

While Genting Singapore's 2Q21 earnings were above expectations, our 2021 forecast remains unchanged as we factored in the impacts of stricter operating capacity earlier.

Maintain BUY on Genting Singapore with an unchanged target price of S$1.08, which implies 8x eventual earnings recovery.
Our valuation also assumes Genting Singapore’s Japan IR bid would not materialise.
See
Dividend yield expected to normalise to 4.1% in 2022, assuming revenue of S$0.02 per share (2.5% 2021F yield).

Vincent Khoo CFA UOB Kay Hian Research | Jack Goh UOB Kay Hian | https://research.uobkayhian.com/ 2021-08-13

SGX Stock Analyst Report BUY MAINTAIN BUY 1.080 SAME 1.080