Brokers' take: Analysts positive on Genting Singapore's FY2022 recovery as tourism opens up

GENTING Singapore's  G13third-quarter financial results underperformed analyst expectations, but the easing up of travel restrictions and the anticipation of returning international visitors give a positive outlook they said.

In reports released on Nov 10, DBS Group Research, UOB Kay Hian (UOBKH) and RHB pointed out that the Q3 2021 financial results had fallen below expectations. The underperformance was attributed to a drop in gaming revenue by 13.9 per cent quarter on quarter, as well as tightened Covid-19 protocols that were in place for a large portion of the quarter.

Maybank Kim Eng (Maybank KE) analyst Yin Shao Yang said that the results were in line with expectations and expects Q4 2021 net profit to be similarly weak, given that new Covid-19 cases in Singapore remain elevated.

However, citing Singapore's ongoing relaxation of quarantine-free travel lanes and opening of borders, analysts are still optimistic on the FY2022 outlook for Genting Singapore.

DBS Group Research, UOBKH and RHB maintained their "buy" calls, while Maybank KE maintained its "hold" call. Target prices of DBS Group Research, UOBKH and Maybank KE remained unchanged, while RHB lowered its target price to S$0.90, down previously from S$0.92.

RHB had cut earnings estimates by 14.7 per cent to factor in the weak third-quarter results, but made no changes to FY2022 to FY2023 estimates. The target price was cut after applying a 2 per cent environmental, social and corporate governance discount as well as after an unchanged 8 times FY2022 enterprise value (EV) to earnings before interest, taxes, depreciation and amortisation ratio (Ebitda) valuation.

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"While we do not expect a full recovery of foreign visitors in FY2021, the ongoing reopening of borders and extension of quarantine-free travel to more countries bode well for a strong FY2022 recovery for Genting Singapore, especially when foreign visitors account for 80 per cent of its total visitorship historically," said RHB.

UOBKH highlighted Singapore's "stellar vaccination" rate of more than 86 per cent, and expects Genting Singapore's valuations to partially factor in earnings recovery and business normalisation in 2022. According to the brokerage, dividend yield is expected to normalise to 4.3 per cent in 2022, assuming revenue and cash flows recover back to pre-pandemic levels.

"Theoretically, our projected 2021 after tax Ebitda is sufficient to fund a final dividend per share of S$0.02 (2.4 per cent FY2021 yield). We project 2021's net cash to be S$3.2 billion, or 32 per cent of the current market cap.

DBS analyst Jason Sum, noted that near-term performance may remain lacklustre due to extended Covid-19 restrictions and soft inbound tourism.

"Relative to other countries in Europe and North America, we believe that the relatively elevated degree of domestic restrictions including mandatory mask wearing at all spaces, limitations on group dining, and early closure of nightspots could discourage inbound tourism," said Sum.

FY2022 and FY2023 Ebitda estimates are also slightly below consensus, as Sum expects mass travel to take longer to normalise.

FY2021 and FY2022 Ebitda estimates are also lowered by 28 per cent and 19 per cent respectively to factor in lower footfall at Resorts World Sentosa in H1 FY2022, said Sum.

"Nonetheless, we are still optimistic of a more pronounced recovery from H2 FY2022, and project Genting Singapore's Ebitda to reach close to 90 per cent of pre-crisis levels in FY2023," added Sum.

Although no dividend was declared in the third quarter ended September, Yin expects Genting Singapore to declare a final dividend per share of S$0.01 in Q4 2021.

Resurgence of Covid-19 cases globally, travel activity taking longer to normalise, bad debts, capital expenditures involved in regional expansion, are some of the main risks to Genting Singapore's recovery, pointed out the analysts.

Shares of Genting Singapore were flat at S$0.815 as at 1.20 pm on Nov 10.

Read more: 

• Genting Singapore posts 11% rise in Q3 net profit on one-off gain, despite lower revenue

• Genting Malaysia injects US$150m into indebted US-based Empire