Genting Singapore jumps to five-month high on surprise earnings rebound

Singapore

SHARES of integrated resort operator Genting Singapore, its Malaysian counterpart and their parent company all surged on Monday, boosted by a quarter-on-quarter turnaround in the Singapore firm's bottom line.

Genting Singapore climbed as much as 9.1 per cent to hit 82 Singapore cents at around 11.52am. It eased slightly to close at 80.5 cents, up six cents or 8.1 per cent from the previous close. Nearly 107 million shares changed hands, making it the second-most traded by value and fourth by volume on the Singapore bourse for the day.

The last time the mainboard-listed counter's price reached such levels was in early June this year.

Meanwhile, Genting Malaysia Berhad, which operates Resorts World Genting, rose 4.1 per cent or RM0.10 to end at RM2.53, with some 50.8 million shares changing hands.

Both firms' Malaysia-listed parent, leisure and hospitality giant Genting Berhad, rallied 9.2 per cent or RM0.35 to a four-month high of RM4.14 on 45.7 million shares traded.

The Singapore unit's Q3 revenue and earnings beat market expectations, with local gamblers helping to drive the firm back into the black.

Net profit after tax stood at S$54.4 million for the quarter to September, reversing from the net loss of S$163.3 million in the previous quarter. However, year on year, it was still down 65.7 per cent from a S$158.9 million net profit previously.

The sequential rebound came as Resorts World Sentosa (RWS) generated higher-than-expected gaming revenue of S$213 million in the latest quarter, RHB wrote on Monday.

Hence, the Q3 net profit forms a strong baseline for earnings moving forward, and brings brighter prospects, RHB analyst Juliana Cai said.

She upgraded the stock to "neutral" from "sell", and raised the target price to 72 cents from 62 cents.

The company's business update on Saturday suggests that it is able to generate an annualised earnings before interest, taxes, depreciation, and amortisation (Ebitda) of S$500-600 million, even in the absence of tourist spending and capacity limitations, Ms Cai added.

"The positive operating cash flow generated, coupled with its existing net cash of S$3.6 billion as at June 30, 2020, gives confidence that the group has sufficient capital to fund its RWS expansion mega capital expenditure of S$4.5 billion over the next four to five years," she said.

While the surprise Q3 earnings could be due to pent-up local demand after a prolonged lockdown, the absence of such demand in Q4 could be offset by school holidays and easing capacity restrictions on attractions, according to RHB. In view of the improving prospects, RHB expects Genting Singapore to resume dividends at the end of this year, likely at two cents per share.

Ms Cai said tourists are likely to return to half of pre-Covid-19 levels by the fourth quarter of 2021 as borders gradually reopen. Singapore's stabilising Covid-19 situation and the positive news flow on vaccines should also support the share price in the near term, she added.

Maybank Kim Eng (MKE) on Sunday maintained its "hold" call on Genting Singapore with a slightly higher target price of 78 cents. The brokerage noted that the Q3 results surprised on the upside, likely due to local gamblers remaining in the city-state to gamble.

Nine-month core net profit would amount to about S$9.9 million, which exceeds MKE's forecast as the brokerage had expected a full-year net loss. The outperformance was thanks to nine-month net gaming revenue falling 60 per cent year on year - 14 percentage points narrower than what MKE expected.

Drawing insights from the results of RWS rival Marina Bay Sands (MBS), MKE analyst Samuel Yin wrote that RWS's high-margin gross gaming revenue (GGR) from slot machines also probably did not fall much year on year as local gamblers had to stay in Singapore as they could not cross into Malaysia to gamble.

Mr Yin more than quadrupled his FY20 Ebitda estimate for Genting Singapore, as he now forecasts mass market (tables and slot machines) GGR to fall by a narrower 50 per cent year on year.