Genting Singapore - DBS Research 2021-08-13: Poised To Benefit From Singapore Reopening

GENTING SINGAPORE LIMITED (SGX:G13)

Genting Singapore - Poised To Benefit From Singapore Reopening

Genting Singapore (SGX:G13)'s 2Q21 adjusted EBITDA of S$148.0m (-49.7% compared to 2Q19, but +15.5% q-o-q) met expectations.1H21 EBITDA amounted to S$276.1m, forming 43.3% of our full-year projection, which is in line with our expectations given that we expect additional business recovery towards the end of 2021. Total revenue was flat q-o-q, as a 4.1% increase in gaming revenue tempered a 15.7% decline in non-gaming revenue. However, EBITDA climbed 15.5% to S$148.0m during the quarter on the back of margin expansion to 53.5% in 2Q21 from 46.1% in 1Q21, likely driven by the reversal of impairment of trade receivables in the quarter.

Genting Singapore booked positive operating cash flow of S$194.4m during the quarter, down moderately (-10% q-o-q) on a sequential basis, but it is still commendable considering attendance at RWS is solely being driven by the locals.

Similar to the previous year, Genting Singapore will not be paying out an interim dividend this year and will likely only reinstate interim dividends after the epidemiological situation in the region has stabilised. However, the company announced it will distribute a final dividend, assuming the situation does not take an unexpected turn for the worse.

As a reminder, Genting Singapore is one of the two remaining candidates for an IR project in the city of Yokohama. Management expects the winner for the Yokohama IR project to be announced by Oct-21, given that the city will need time to work on a development plan with the winner, as the application submission to the national government is due in April-22.

Payment for land acquisition has already been made in 1H21, and the management is hopeful that construction will begin sometime in 2022, which suggests that the full completion of the project will be delayed to at least 2026.
We see more clarity on Genting Singapore’s recovery prospects with Singapore outlining plans to progressively reopen its borders. We believe that inbound tourism could resume towards the end of 2021, as the Singapore government has laid out a road map to gradually ease travel restrictions after hitting critical vaccination milestones. Singapore is one of the world’s frontrunners in vaccine deployment and has administered 141 doses per 100 population as of 10-Aug, ahead of most developed economies, including the US and UK.
Genting Singapore is a key beneficiary of the reopening tailwind, given that it is one of Singapore’s top tourist destinations, with international tourists accounting for 80% of attendance prior to the pandemic.

The local crowd is a prime example of pent-up demand. Gaming revenue in 1H21 was only down by 49% compared to 1H19, even though the local crowd only constitutes 20% of total attendance. After an extended period of travel deprivation, we believe that tourists will unleash their pent-up demand when they finally start travelling again. The mass gaming segment will likely normalise at a faster pace (total mass gaming volumes in 1H21 were only down by 7.6% compared to 1H19) than the VIP division due to the protracted absence of Chinese VIP punters, which accounted for around 50% of rolling chip volumes by our estimates prior to the pandemic.

While our FY21/22F earnings projections are largely unchanged, we are raising our target price for Genting Singapore slightly to S$1.00 from S$0.95 as we roll forward our valuation peg to 11.0x blended FY21/22F EBITDA from 11.0x FY21F EBITDA previously.
We continue to like Genting Singapore for its solid recovery prospects and cheap valuation against regional peers (Genting Singapore is priced at a 33% discount to peers on an EV/EBITDA [FY22F] basis).
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Jason SUM CFA DBS Group Research | https://www.dbsvickers.com/ 2021-08-13

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