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Broker's take: Maybank KE downgrades Genting Singapore, slashes forecasts

MAYBANK Kim Eng on Thursday downgraded Genting Singapore to “hold” from “buy”, noting that the stock has less than 10 per cent upside potential.

“In our view, its share price may have peaked for now,” analyst Yin Shao Yang wrote.

He kept the target price unchanged at 80 Singapore cents, based on a lower weighted average cost of capital of 13 per cent, compared with 15 per cent previously.

Genting Singapore shares were trading at 75.5 cents as at 3.35pm on Thursday, down 1.5 cents or 2 per cent.

Although the company’s integrated resort, Resorts World Sentosa (RWS) has reopened, Mr Yin anticipates a slower recovery for its operations.

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Maybank Kim Eng thus slashed its earnings forecasts for Genting Singapore. The research team is now expecting a net loss of S$214.6 million for FY20, versus its earlier forecast of a S$49.4 million profit.

It also cut its estimates for FY21 profit by 43 per cent, although it tweaked its FY22 net profit forecast upwards by 2 per cent.

That being said, Maybank Kim Eng maintained its dividend per share forecast at S$0.04 per year, as it believes Genting Singapore’s “huge” net cash position enables it to continue paying dividends.

By market, the research team reckons that the mass market will recover more quickly than the VIP segment, seeing as the former is geared more towards locals and Malaysians.

RWS reopened on July 1 after shutting for nearly three months. With Singapore’s borders still effectively closed, the gamblers who have been patronising the casino so far this month are almost all Singapore citizens and permanent residents, Mr Yin said.

“Coupled with safe-distancing requirements, we estimate that the current VIP volume and mass-market gross gaming revenue may come in at only about one-eighth and one-quarter of pre-closure levels respectively,” he added.

In general, the international market will take time to recover, according to Maybank Kim Eng. Indonesian visitors in particular are unlikely to return to Singapore, given that the Covid-19 pandemic is worsening in Indonesia.

However, Maybank Kim Eng believes Malaysians will probably visit Singapore soon, as the pandemic has been contained there. “We are uncertain about the Chinese returning soon, given the broad caution about reopening borders, even in the case of ‘green lanes’. Hence, we deem it likely that Malaysians will return in volume first, with Chinese visitor arrivals to remain low for an extended period,” the analyst wrote.

RWS last week announced “one-off” layoffs as the pandemic continues to take its toll on the tourism industry. Without giving figures, RWS said it has managed to keep "a vast majority of local staff" in the retrenchment exercise. Genting Singapore had about 9,400 employees last year, when just over seven in 10 were either Singapore citizens or permanent residents.

Meanwhile, RWS staff who escaped the axe can take up higher-value, redesigned jobs as it pushes ahead with its “RWS 2.0” redevelopment. 

Rival integrated resort Marina Bay Sands reported that it plunged into a US$113 million loss for the second quarter this year, dragged by its shutdown during the country’s “circuit breaker” for most of the quarter.

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