GenS reported 2H21 core net profit of SGD69m (-53.2% YoY) and brought FY21’s sum to SGD130.1m (+43.3% YoY). The results were within ours (99.3%) but below consensus expectations (66.3%). We maintain HOLD with an unchanged TP of SGD0.76 based on FY22 EV/EBITDA multiple of 8x. We are encouraged by Singapore government’s easing of travel and social restrictions which should bolster for better visitations and boost the operating capacity in RWS. These measures will pave way for a sustained earnings recovery for GenS.

Within ours but below consensus. GenS reported 2H21 core net profit of SGD69m (-53.2% YoY) which brought FY21’s sum to SGD130.1m (+99% YoY). The results were within ours (99.3%) but below consensus (66.3%) expectations. FY21 EI sum of -SGD53.2m was stripped off mainly comprising of reversal of impairment on trade receivables and fair value gain on financial assets.

Dividend. Proposed final dividend of 1 cent per share subject to the approval of shareholders at the next AGM (4Q20: none). FY21 DPS: 1 cent (FY20 DPS: 3.5 cents).

QoQ. Revenue increased by 3.8% contributed by non-gaming (+62%) while partially offset by gaming (-15.3%) revenue. Nonetheless, EBITDA declined by -32.4% due to the lower gaming revenue contribution which provides a higher margin compared to the non-gaming segment.

YoY. Revenue decreased by -17% due to the decline in gaming (-22.8%) while partially offset by non-gaming (+7.3%) revenue. The overall decline in revenue is due to the lower capacity as a result of more stringent social restrictions as well as lower local visitations due to concerns over higher community cases and the outbreak of Omicron variant in Dec 2021. As such, EBITDA decreased by -67.2% due to weaker operating leverage from the lower visitations and capacity utilization.

YTD. Revenue is flattish at +0.3% as the increase in gaming (+14.5%) was offset by non-gaming (-16.6%) revenue. Nonetheless, core PATAMI improved by +99% due to higher gaming revenue which provides better margin as well as the cost saving measures taken by the group since FY20.

Outlook. The Singapore government is currently progressively easing border restrictions by launching VTLs with more countries facilitating quarantine free travel for fully vaccinated travellers. The recent announcement on 16 Feb 2022 to lift safe distancing restrictions in mask-on settings will also likely boost the operating capacity in the casinos and attractions in RWS. These measures will improve the visitations to RWS thus allowing GenS to achieve better operating leverage. Furthermore, GenS also indicated that it will commence construction activities for its SGD4.5bn expansion plan in RWS2.0 starting 2H22 and targeted to complete by end-2024. RWS2.0 expansion is targeted to capture the shift in traveling preferences for travellers that combine their business and leisure activities. The expanded hotel capacity should also extend visitors’ length of stay and spending in RWS.

Forecast. Unchanged. We maintain HOLD with an unchanged TP of SGD0.76 based on FY22 EV/EBITDA multiple of 8x. We are encouraged by Singapore government’s easing of travel and social restrictions which should bolster for better visitations and boost the operating capacity in RWS. These measures will pave way for a sustained earnings recovery for GenS.

Source: Hong Leong Investment Bank Research - 18 Feb 2022