Genting Group’s subsidiary, Genting Singapore (GENS) reported a 2019 core-PAATMI of S$705m (-8% yoy), which was within expectations, as it constituted 104% and 103% of our/consensus forecasts. Gaming revenue was down by 13% yoy for the quarter, as the negative impact from the entry levy hike continued. The outlook for GENS will remain challenging over the next 1-2 quarters, as we expect both local and foreign visitation to decline due to the ongoing outbreak of COVID-19. Despite the lower profit, GENS announced a higher final DPS of 2.5 cents, which came as a positive surprise to us.

Expecting Sharp Volume Contraction for 1Q20

We believe that the weak gaming revenue in 4QFY19 (+7.4% qoq; -12.8% yoy) was impacted by lower visitation from locals, as local punters are still adjusting to the 50% entry levy hike in April 2019. The improvement qoq was partly due to the seasonal holidays, which tend to attract higher visitation from foreign patrons. As the COVID-2019 outbreak continues with entry restrictions in place, we are expecting visitation for both local and foreign patrons to decline, at least for 1QFY20. We had previously assumed visitation growth of around 2% for FY20E.

No Change in Expansion Plans

Despite the coronavirus outbreak, management has guided that the RWS2.0 expansion is moving according to schedule, and construction work is likely to start by mid-2020. GENS is also bringing forward its refurbishment work of its hotel rooms (10-15% of its total room inventory), to use the opportunity of the low visitation currently. Management is hopeful that overall visitation would recover significantly after the outbreak, and is working to minimize any possible disruptions that could happen during the recovery. A new attraction “Once A Pirate” is on track to open by late 2020.

Maintain BUY With Unchanged TP of RM7.25

We are keeping our forecasts for GENT until the release of its results by month-end. As such we are maintaining our BUY call and SOTP-based TP at RM7.25. The key downside risks to our call would be i) unfavourable luck factor, and ii) fewer-than-expected high-roller arrivals. In terms of the progress of the Japan IR bid, management is expecting the decision of the prefectures by end of the year.

Source: Affin Hwang Research - 13 Feb 2020