GenS reported 3Q21 core net profit of SGD26m (QoQ: -2.5%, YoY: -64.5%), bringing 9M21 core net profit to SGD87.2m (YoY: +7.9x). The results were below our and consensus expectations, making up 37.4% and 34.2% of the full-year forecasts, respectively. The miss was due to lower-than-expected footfall to RWS. As such, we cut our forecast for FY21 by -43.8%. Maintain HOLD with an unchanged TP of SGD0.76. With the gradual easing of border restrictions, we expect GenS to record sequential improvements going into FY22.

Below expectations. GenS reported 3Q21 core net profit of SGD26m (QoQ: -2.5%, YoY: -64.5%), bringing 9M21 core net profit to SGD87.2m (YoY: +7.9x). The results were below our and consensus expectations, making up 37.4% and 34.2% of full-year forecasts, respectively. The results miss was due to lower-than-expected footfall to RWS. 9M21 core net profit of SGD87.2m was derived after adjusting for -SGD61.8m of EIs mainly comprising of reversal of impairment losses and write back of accruals no longer needed relating to the Yokohama IR bid.

Dividend. None (3Q20: none). 9M21: none (9M20: none).

QoQ/YoY. Revenue decreased by -9.2%/-16.4% while core net profit decreased by -2.5%/-64.5%. The lower revenue was due to the stricter gathering restrictions introduced to curb the surge of new community cases, including reduction in group size for social gathering.

YTD. Revenue increased by 7.3% while core net profit increased by 7.9x. The higher revenue was because there was a lockdown imposed under circuit breaker during Mar-May 2020 SPLY. Core net profit increased by 7.9x due to lower operating cost as well as the low base from SPLY.

Outlook. GenS which relies heavily on international visitors (historically accounting for c.70-80% visitor ship) should see some relief from the recent border relaxation for selected countries under the vaccinated travel lane (VTL) program. VTL allows quarantine-free travel to Singapore for eligible countries, including Malaysia (from 29 Nov onwards).

Forecast. Due to the results miss, we cut our FY21 forecast by -43.8% to account for the delayed recovery while our FY22-23 projections are unchanged. We maintain our HOLD rating with unchanged TP of SGD0.76 based on FY22 EV/EBITDA multiple of 8x. With the gradual easing of border restrictions, we expect GenS to record sequential improvements going into FY22.

Source: Hong Leong Investment Bank Research - 10 Nov 2021