GENTING SINGAPORE LIMITED (SGX:G13)
Genting Singapore - 4Q21 Better Capital Management In Sight
- Genting Singapore’s 4Q21 results came in below our expectations as the Omicron outbreak stalled authorities’ initial endeavours to relax social distancing measures and border restrictions.
- Positively, Singapore has reinstated progressive reopening of its borders via VTLs with multiple countries and loosening its social prohibitions. More importantly, cash-rich Genting Singapore plans to enhance its capital management efforts.
- Maintain BUY call on Genting Singapore with target price S$1.08.
Lacklustre 4Q21 results that underperformed rival MBS.
- Genting Singapore (SGX:G13)’s 4Q21 results revealed that Resort World Sentosa’s (RWS) gaming revenue declined significantly (-15% q-o-q) from 3Q21 and underperformed rival Marina Bay Sands’ (MBS) q-o-q gaming revenue improvement of 68% from a low base.
- Adjusted EBITDA fell more than revenue to S$69m (-67% y-o-y, -32% q-o-q), missing our and consensus’ expectations. 2021 net profit represents only about 87% and 90% of our and consensus’ full-year forecasts respectively. The earnings disappointment reflected soft gaming volume, lower government subsidies and presumably lower win rate and closure costs associated to its abandoned bid for Japan’s gaming concession.
Soft gaming revenue reflects tightened SOP and lower VIP volumes.
- While Genting Singapore does not provide gaming statistics, we reckon that both the mass market and VIP volumes fell in 4Q21. Stringent social distancing set-ups (two players per gaming table, alternate slots and electronic table games machines) in Oct-Nov 21 lowered gaming capacity, while the emergence of the Omicron variant in 4Q21 caused a rise in local community cases.
- VIP volumes also contracted as many local gamers presumably took advantage of travel bubbles during the holiday season to travel overseas.
Genting Singapore's final dividend disappointed.
- Genting Singapore declared a S$0.01 final dividend (4Q19: S$0.025), implying a full-year yield of 1.3%. Recall that Genting Singapore did not declare any interim dividend in the previous quarters this year (2Q19: S$0.015), mainly due to lacklustre operational profit in 9M21.
Significantly better capital management moving forward?
- With Genting Singapore finally dropping its decade-long pursuit of clinching a pricey Japan integrated resort (IR) concession, and with no new compelling projects to consider, management is targeting to enhance capital management and to develop a dividend policy. Theoretically, the scope of Genting Singapore’s capital management can be significant, considering its net cash of S$ 3.3b (S$0.27/share) and that post-pandemic EBITDA is largely sufficient to fund its S$4.5b RWS 2.0 expansion.
- Bidding sayonara to Japan’s IR pursuit. In Dec 21, Genting Singapore announced that it plans to shut down an aggregate of eight subsidiaries incorporated in Japan, officially ending Genting Singapore’s bidding in Japan’s IR concession. To recall, despite expressing deep interest on clinching a Japan IR, Genting Singapore did not submit its Request For Proposal (RFP) application before the deadline and withdrew from the Osaka bid in Feb 20. In Aug 2021, Genting Singapore’s Yokohama IR bid was also scrapped following hardline anti-IR campaigner Takeharu Yamanaka winning Yokohama’s mayoral election.
- S$4.5b expansion plan back on track. Recall that RWS had committed to the Singapore government to spend S$4.5b over five years to elevate the resort’s vibrancy. For the first phase of RWS 2.0, Genting Singapore will be investing S$400m in capex for the construction of Universal Studios Singapore’s Minion Land, the Singapore Oceanarium, as well as refurbishment of its three hotels beginning 2Q22.
A laggard among beneficiaries of border reopening; Omicron variant disruptions transitory.
- While the emergence of the Omicron variant has stalled the recovery of Genting Singapore, we take the view that most countries will gradually re-open their borders in 1H22 as hospitalisation and death rates remain relatively low.
- SOP relaxations and VTL initiations a symbolic step towards normalcy restoration. While Singapore has transitioned to its COVID-19 Resilience Phase since Nov 21, the nation has further relaxed some of its cumbersome standard operating procedures (SOP) and RWS has been allowed to operate with higher gaming capacity since Dec 21. Singapore has also piloted quarantine-free vaccinated travel lanes (VTL) with > 20 countries and is looking to fully restore VTL quotas with Malaysia from Feb 22. These VTL countries contributed to > 60% of the total daily arrivals at Changi Airport in 2019.
Genting Singapore - Earnings forecast revision & recommendation
- We have reduced our 2022 EBITDA estimate by 25%, following the later-than-expected relaxation of borders which was previously disrupted by the emergence of the Omicron variant.
- Maintain BUY call on Genting Singapore with an unchanged target price of S$1.08, which implies 8.8x 2023F EV/EBITDA (-0.5 below SD). We expect the stock to re-rate in reaction to Singapore’s gradual border reopening. Theoretically, Genting Singapore's share price could reach S$1.08 in 2023 in the scenario of Genting Singapore’s EBITDA clawing its way back to the pre-pandemic level of S$1.2b.
- Genting Singapore's dividend yield expected to normalise to 4.7% in 2023, assuming revenue and cash flows recover back to pre-pandemic levels, and that Genting Singapore restores its 2019 dividend payout level of S$0.04. Theoretically, our projected 2023 after-tax EBITDA is sufficient to fund a dividend of S$0.04 (4.7% of 2023 yield).
- See
Singapore Research
UOB Kay Hian Research
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https://research.uobkayhian.com/
2022-02-18
SGX Stock
Analyst Report
1.080
SAME
1.080
