Genting Singapore rises 1.2% on heavy trading, after firm qualifies for Yokohama IR RFP

Singapore

SHARES of Genting Singapore rose 1.2 per cent on Wednesday amid heavy trading, after the operator of Resorts World Sentosa was revealed to be one of two qualifying parties for the Yokohama integrated resort (IR) request for proposal (RFP).

The counter rose as high as 88 Singapore cents on Wednesday afternoon, before ending the day at 86.5 cents. Some 74 million shares changed hands, making it the fifth most traded stock on the Singapore Exchange by volume.

No married deals took place throughout the day, according to ShareInvestor data.

While local authorities did not name the accepted parties for Yokohama's IR RFP, Japanese public broadcaster NHK on Monday reported, citing unnamed sources, that one of the groups was a Genting joint venture (JV) with Japanese conglomerate Sega Sammy Holdings. The other qualifier is headed by US-listed Melco Resorts & Entertainment.

Yokohama is expected to announce the winner of its IR RFP process in the third quarter this year.

In a research report on Wednesday, Maybank Kim Eng (Maybank KE) upgraded its call on Genting Singapore to "buy" from "hold" while raising its target price to S$1.16 from S$0.86 previously.

This comes on the assumption that Genting's JV with Sega Sammy Holdings will win the Yokohama IR RFP.

Maybank KE analyst Yin Shao Yang estimates that the anticipated win will add S$1.8 billion or S$0.30 per share to Genting's earnings, should the group own 50 per cent of the JV.

Assuming that the Yokohama IR will be 100 per cent equity financed, he reckons the project will generate US$2.7 billion in net profit in its first full year of operations.

"On another note, Sega Sammy stated that it would prefer a minority stake in any JV for a Yokohama IR bid. Thus, we gather that Genting may own at least 50 per cent of the Genting-Sega Sammy JV," said the analyst.

Referring to the upcoming Yokohama mayoral elections to be held on Aug 29 this year, the analyst deems Genting a "tactical buy" even in the event that an anti-IR mayor is elected as no value from a Yokohama IR has been imputed into its share price.

"Genting's RWS operates, in our opinion, in the most highly regulated casino jurisdiction in the world. In our view, Genting has strong ESG (environmental, social and corporate governance) credentials which stand out among its regional peers, especially the Macanese ones," said Mr Yin.

"Countries seeking to liberalise their casino industries like Japan are looking to Singapore's highly-regulated casino industry and the strong ESG credentials it engenders for guidance. In our view, this could give Genting an advantage in bidding for a Japanese casino licence," he added.

KGI Research has a tactical "buy" call on the stock with a S$0.95 target price, while recommending entry at S$0.84 and a stop-loss point at S$0.78.

In a report on Wednesday, the research house noted that shares of Genting were recently sold off due to rising Covid-19 cases in Singapore and subsequent tightening measures. It deems this a buying opportunity as Genting remains a good reopening play in KGI's view. The group also stands "a good chance" of securing the Yokohama IR project, it said.

"Analysts' expectations aren't very high - mainly as we think that the markets have not fully accounted for the Yokohama IRs. There are eight 'buys', 11 'holds', one 'sell' and a 12-month average target price of S$0.95 (implied 11 per cent upside)," noted the research house.