• Genting Bhd’s (GENT) subsidiary Genting Singapore (GENS) has just reported a lacklustre set of results; 1HFY20 LATAMI of SGD63.3m is tracking below both our and consensus expectations
• Most of the attractions (including the casino) are already operational, but the overall capacity is capped due to social distancing requirements
• No Change to Our 12-month TP of RM4.45, Maintain HOLD.

Heavily Reliance on Foreign Visitors

It is not surprising that GENS swung into the red in 2Q20, as most of its attractions (including the casino) were closed for most of the quarter to combat the spread of COVID-19. Although almost all the attractions have reopened since July, management guided that most of them could still be loss-making as the visitation numbers are significantly below pre-COVID-19 levels. We believe that the situation will remain challenging as 70-75% of previous visitors were foreigners. Hence, without the re-opening of borders to tourists (mass market), GENS is likely to remain in the red for the remainder of the year.

Future Plans Are Also Disrupted by COVID-19

Apart from the capacity cap on its attractions and casino due to social distancing requirements, the progress of the redevelopment of RWS 2.0 is also disrupted as new designs are required to factor in wider spaces for crowds. Management guided that it will engage with the government on the overall capex plan, opening timeline and its gaming tax issue in the coming quarters, as it will be quite challenging to meet the timeline/deadline proposed previously. In terms of the Japan IR bid, there is also limited progress given that GENS has yet to receive the request of proposal (RFP) from the city of Yokohama in Japan.

Maintain HOLD and TP at RM4.45

We are keeping our earnings forecasts and SOTP-derived TP of RM4.45, pending the release of GENT’s results by end-August. Although GENS didn’t announce any interim dividend for the quarter (SGD0.015 in 1H19), we believe that GENS’ balance sheet remains healthy, as it had a cash balance of close to SGD4bn at end-2019 with less than SGD500m of debt. Hence with the on-going cost rationalisation programme, we believe GENS can still sustain itself in the current operating environment.

Source: Affin Hwang Research - 7 Aug 2020