GenS reported 2Q21 core net profit of SGD53.7m (+55.5% QoQ, YoY: -SGD163m) bringing 1H21 core net profit to SGD77.0m (YoY: -RM63.3m). The results were below our (25.0% of full year forecast) and consensus’ (27.4%) expectations, largely due to weaker than expected footfall into RWS from movement control measures implemented (albeit more relaxed QoQ) in Singapore. We remain cautious on the prospects of GenS as Singapore’s stringent travelling restrictions and resurgence of Covid-19 cases from its key markets are expected to be a drag on its gaming revenue. Nevertheless, we maintain our HOLD call at a lower target price of SGD0.76 (from SGD0.85) based on 8x (unchanged) FY22 EV/EBITDA.

Below expectations. GenS reported 2Q21 core net profit of SGD53.7m (+55.5% QoQ, YoY: -SGD163m) bringing 1H21’s sum to SGD77.0m (YoY: -RM63.3m). The results were below our (25.0% of full year forecast) and consensus’ (27.4%) expectations, largely due to weaker than expected footfall into RWS. Core net profit of SGD77.0m was derived after adjusting for -SGD11.2m of EIs mainly comprising of reversal of impairment losses.

Dividend. No dividend was declared for the quarter, none declared SPLY.

QoQ. Increase in core net profit to SGD53.7m (+55.5%) was largely due an increase in gaming revenues from locals due to more relaxed movement control measures.

YoY. GenS recorded a profit of SGD53.7m, overturning its core net loss position of - SGD163m due to more relaxed movement control measures from the effective management of the Covid-19 pandemic by the Singaporean government.

YTD. GenS recorded a profit of SGD77.0m from a loss of -SGD117m due to lower Covid-19 cases and more relaxed movement control measures.

Looking beyond FY21. Low international visitorships will likely remain due to the resurgence of Covid-19 cases in several of GenS’ key source markets. Hence, we have become less optimistic on GenS recovery in FY21. However, we still expect GenS to record sequential quarterly improvements going into FY22 and we believe that investors will need to have a more long-term view on GenS.

Forecast. We cut our forecasts for FY21/22 by -24.4/-12.8% to factor in further delays for the return of international visitors.

We maintain our HOLD rating with a lower TP of SGD0.76 (from SGD0.85) based on FY22 (rolled forward) EV/EBITDA multiple of 8x (unchanged) which is roughly - 0.9SD below its 5-year mean. Share price may potentially remain subdued in the near term given ongoing uncertainties with regards to the resurgence of Covid-19 cases from its key markets.

Source: Hong Leong Investment Bank Research - 13 Aug 2021