Brokers' take: RHB raises targets on Genting, sees potential upside in dividends
RHB on Friday (Apr 8) raised its target price on Genting Singapore G13 to S$0.95 from S$0.90, amid a more optimistic outlook after checking in with the integrated resort operator's management.
"We still like this company for its recovery from borders reopening and potential upside in dividends," the research team said.
The new target price of S$0.95 represents a potential upside of 17.3 per cent from the counter's Friday closing price of S$0.81. Shares of Genting were down 0.6 per cent at the market close.
The new target assumes Genting's enterprise value would be 8.5 times its earnings before interest, taxes, depreciation and amortisation (Ebitda).
"The higher multiple reflects Genting's better and more certain prospects, as Singapore begins to treat Covid-19 as an endemic, reducing the probability of more future strict lockdowns," said RHB.
Genting Singapore's FY2023 EV/Ebitda ratio of 7.8 times is at a discount to its regional peer average of about 11 times, but RHB noted that regional valuations may be subdued due to unfavourable conditions in Macau - which Genting is shielded from.
A NEWSLETTER FOR YOU
Tuesday, 12 pm
Property Insights
Get an exclusive analysis of real estate and property news in Singapore and beyond.
The research team has also maintained its "buy" call on the counter, premised on a compound annual growth rate of 92 per cent driven by the return of international tourists, as well as a potential upside in dividends.
As for dividends, RHB said Genting will gradually strive towards a pre-pandemic dividend per share (DPS) of S$0.04, given its "healthy" net cash pile of S$0.38 per share. This comes after the group shuttered its Japanese subsidiary after Yokohama cancelled its plans for an integrated resort in September 2021.
However, given the "unpredictable recovery path", RHB's estimates for DPS are conservative at S$0.02-S$0.03 for FY2022-23. It does not rule out further upside should the recovery outlook become clearer.
"While Genting's recovery play is well-documented, we believe investor interest in the stock may pick up once earnings recover," RHB said.
It expects Genting to benefit from Singapore's reopening of its international borders to vaccinated travellers, along with the Republic's focus on reviving the tourism industry. Footfall has also improved since Apr 1, Genting's management noted.
On Wednesday, the Singapore Tourism Board said it would set aside S$500 million to support the tourism sector in the coming years.
RHB believes the pent-up demand for international travel will drive the return of tourists from Genting's traditional markets in Asean and North Asia, which accounted for about 60-70 per cent of its visitor numbers prior to the pandemic.
The return of business tourists as a result of the Singapore government's push to attract more meetings, incentives, conferences and exhibitions (MICE) may also have a positive spillover effect on Genting.
Copyright SPH Media. All rights reserved.
