GENTING SINGAPORE LIMITED (SGX:G13)
Genting Singapore - Fundamentals Improving But Likely Reflected In Share Price
- Genting Singapore (SGX:G13)'s 1H22 results disappointed on low VIP win rate. That said, the higher margin mass market is recovering quickly.
- Going forward, Genting Singapore expects future earnings to be better. We trim FY22E earnings forecast for Genting Singapore by 15% but long term earnings little changed.
Low VIP win rate weighed on Genting Singapore's 1H22 results…
- Genting Singapore's 2Q22 core net profit of S$65.1m brought 1H22 core net profit to S$108.7m which was below our expectations at 24% of our full year estimate. The shortfall was largely due to an unusually low 2Q22 VIP win rate of 1.5% (theoretical average and MIBG forecast: 2.9%).
- Adjusted for normal VIP win rate, 2Q22 EBITDA would have been 27% higher at S$182.2m or > 70% higher q-o-q.
- Notwithstanding the above, the interim dividend of S$0.01 was within our expectations at 50% of our full year estimate.
… but high margin mass market recovering rapidly
- In the long term, VIP win rate will average at the theoretical average. More importantly, the stable and higher margin 1H22 industry mass market gross gaming revenue (GGR) recovered to 75% of 1H19 levels.
- In fact, we gather that 2Q22 industry mass market GGR recovered to ~90% of 2Q19 levels (RWS: ~85%).
- Singapore reopened borders on 1 Apr 2022 and axed COVID-19 testing requirements on 26 Apr 2022. 1H22 RWS share of mass market GGR eased 8ppts h-o-h to 37% but we expected this.
Genting Singapore struck a rare optimistic tone, in our view
- Genting Singapore shares our view that future quarterly earnings will recover strongly as air connectivity to Singapore recovers. Even without Chinese gamblers, it expects earnings to recover to close to pre-COVID levels over the next 12-18 months and plans to hire ~1,600 staff to meet demand.
- On that note, we leave our FY23E/FY24E earnings forecast for Genting Singapore little changed (-1%/-1%). Our FY22E earnings forecast for Genting Singapore are trimmed 15% only to reflect a low-ish VIP win rate of 2.6%. Long term, we continue to assume VIP win rate of 2.9%.
- See
Downgrade Genting Singapore to HOLD
- Reflecting Genting Singapore’s optimism, we reduce our WACC to 11.0% from 11.6% as we lower our Beta to 1.3x from 1.4x. Even though this tweaks our DCF-based target price for Genting Singapore to S$0.86 from S$0.85, upside from the current Genting Singapore's Share Price has narrowed to < 10%. Downgrade Genting Singapore to HOLD from BUY.
Yin Shao Yang
Maybank Research
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https://www.maybank-ke.com.sg/
2022-08-15
SGX Stock
Analyst Report
0.86
UP
0.850
