Brokers' take: Analysts lower targets on Genting Singapore on lower-than-expected earnings

MAYBANK Kim Eng (Maybank KE) and RHB have maintained their "hold" and "neutral" calls respectively on Genting Singapore, while CGS-CIMB has maintained its "add" call.

All three brokerages revised target prices downward, with the Resorts World Singapore (RWS) operator's Q1 FY2021 earnings having missed expectations.

While Maybank KE lowered its target price from S$0.92 to S$0.86, RHB revised its target price from S$0.94 to S$0.92, adding that the impact of the pandemic was "more severe than expected". CGS-CIMB lowered its target price from S$1.05 to S$1.

To recap, Genting's total revenue in Q1 fell quarter on quarter by 12 per cent, as non-gaming revenue experienced a 29 per cent fall. Gaming revenue inched up by 1.6 per cent.

Following the group's results announcement, RHB and CGS-CIMB both cut their projected earnings for FY2021 to FY2023.

In separate reports issued on Monday, Maybank KE and RHB noted the integrated report operator's continued reliance on domestic visitors for its casino revenue, as borders remain closed.

Maybank analyst Samuel Yin added that key foreign markets such as Malaysia, with its "high margin mass market", remain inaccessible as Covid-19 cases spike. He has slashed his earnings estimates for Genting over FY2021 and FY2022, but leaves his projections for FY2023 little changed as he continues to expect a recovery over this period.

The Singapore research team at RHB said: "The current mean valuation is fair, while a full re-opening of Singapore's borders may not take place in the near term, thereby dampening earnings recovery prospects." It noted that the slow progress of vaccination programmes and possible revisions to proposed travel bubbles indicate continued slow near-term recovery prospects.

CGS-CIMB analyst Cezzanne See believes that the fall in margins could be due to tapering government support, a rise in operational costs and the lack of provision reversals that were partly taken in Q4 2020.

"Genting's further recovery relies on Singapore's borders reopening, but we still like it for its strong balance sheet, which will help tide it over the current tough times," she said.

UOB Kay Hian (UOBKH) similarly maintained its "buy" call on the stock, but left its target price unchanged at S$1.08. This is despite the brokerage's view that Genting's Q1 2021 results were "unexciting", comparing its flattish gaming revenue to rival Marina Bay Sands' "impressive" quarter-on-quarter gaming revenue growth of 28 per cent.

UOBKH also noted the significant fall in non-gaming revenue, which it attributed to seasonality and the tapering impact of the S$100 SingapoRediscovers Vouchers.

The brokerage nonetheless remains confident in better earnings recoveries in 2022, citing global vaccination efforts, Singapore's relative success at containing the pandemic and Genting's expansion plans both locally and abroad.

Genting Singapore shares closed S$0.01 or 1.2 per cent lower at S$0.84 on Monday.