Brokers’ take: Maybank downgrades Genting Sing as improving fundamentals priced in

MAYBANK on Monday (Aug 15) downgraded Genting Singapore to a "hold" from its earlier "buy" call after H1 results disappointed over a low VIP win rate of 1.5 per cent in Q2 this year, missing theoretical average and Maybank Investment Banking Groups (MIBG)'s forecast of 2.9 per cent.

The brokerage however revised its target price upwards to S$0.86 as analyst Yin Shao Yang believes the VIP win rate at the Resorts World Sentosa operator will reach theoretical average in the long term.

More importantly, Yin noted that the industry mass market gross gaming revenue in H1 had already recovered to 75 per cent of the H1 levels in 2019 - which he regards as an indicator that high margin mass market is recovering rapidly.

Further, the analyst also shared similar sentiments on the company's outlook, in which Genting Singapore expects future quarterly earnings will recover strongly as air connectivity to Singapore improves.

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, said Yin, who trimmed his FY2022 earnings estimates by 15 per cent to account for the low VIP win rates, but kept his FY2023 and FY2024 earnings estimates largely unchanged.

Downside factors that may affect Genting Singapore's performance include bad debts, particularly as gambling debts are not enforceable in China even as the Chinese account for the majority of VIPs; as well as regional expansion, as new jurisdictions often require high capex commitments without guaranteed returns.

Shares of Genting Singapore traded down 2.4 per cent or S$0.02 on Monday as at 1.37pm, to S$0.805.



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