GenS reported 4QFY20 core net profit of SGD81.0m (+10.7% QoQ, -54.0% YoY), bringing 12MFY20’s sum to SGD90.8m (-87.1% YoY). The results were above our and consensus’ expectations constituting 130%/178% of our/consensus forecasts due to higher than expected gaming volumes generated from local gamblers as Singapore continues to record low daily Covid-19 cases. 12MFY20 EI sum of -SGD21.6m was stripped off largely comprising of impairments carried out in 2QFY20. We remain cautious on the prospects of GenS despite its stronger than expected performance as Singapore’s stringent travelling restrictions is expected to deter foreign gamblers from entering the country. Nevertheless, we maintain our HOLD call at a higher target price of SGD0.85 based on FY21 EV/EBITDA multiple of 8x (from 7x previously).

Above expectations. GenS reported 4QFY20 core net profit of SGD81.0m (+10.7% QoQ, -54.0% YoY), bringing 12MFY20’s sum to SGD90.8m (-87.1% YoY). The results were very much above ours (130%) and consensus (178%) expectations, largely due to higher-than-expected gaming volumes generated from local gamblers. 12MFY20 EI sum of -SGD21.6m was stripped off largely comprising of impairments carried out in 2QFY20.

Dividend. No dividend was declared for the quarter, 2.5sen declared in 1HFY20 (vs 3.5sen in FY19).

QoQ. Improvement in core net profit to SGD81.0m (+10.7%) was largely due an increase in gaming revenue and profit from local gamblers.

YoY. Core net profit fell by -54% due to the absence of foreign gamblers from the Covid- 19 pandemic.

YTD. Core profit fell by 87.1% due to lower visitorship as a result of Covid-19.

We remain cautious despite a satisfactory performance. To recap, casino operations were resumed on 1 July albeit with SOPs in place such as a maximum of 3 to 4 players per table (no standing bets allowed), alternating usage of slot machines, and entry to the casino is limited to members only. Despite the lack of international visitors, we are positive on GenS’ cost optimisation initiative. However we are cognisant of the fact that the absence of international visitors would impede its recovery trajectory in FY21. We expect international visitors to improve sequentially beginning from 3QFY21.

Forecast. We are maintaining our forecasts for FY21-22 despite the better than expected results as we remain cautious on the timeline with regards to the relaxation of travel measures from the Singaporean government.

We maintain HOLD with a higher TP of SGD0.85 (from SGD0.77) based on an FY21 EV/EBITDA multiple of 8x (from 7x previously) which is roughly -0.9SD below 5-year mean. Share price may potentially remain subdued in the near-term given ongoing uncertainties with regards to the Covid-19 pandemic coupled with its recent strong share price performance. GenS’ war chest of SGD3.9bn (net cash of SGD3.7bn as of FY20) will be more than sufficient to wither through this slowdown.

Source: Hong Leong Investment Bank Research - 10 Feb 2021