GENS reported its worst ever results for 2QFY20 with core loss of SGD116.5m as a complete lockdown shrunk revenue by 90% sequentially. The upcoming 3QFY20 is likely to be another lacklustre quarter as business remains challenging with cross border travelling still restricted. For now, we keep our call on GENTING unchanged pending its 2QFY20 results release later this month end.

GENS’ 2QFY20 results badly hit. In a quarterly business overview released yesterday, Genting Singapore Ltd (GENS, Not Rated) reported a core loss of SGD116.5m in 2QFY20, turning 1HFY20 into the red with core loss of SGD63.3m, against consensus estimate of SGD0.2m for FY20. This results likely matched consensus as business has reopened from July. It did not declare half-yearly dividend in 1HFY20 for the first time since 2017.

The worst ever results since inception. With economic lockdown for almost the entire quarter, from 06 Apr to 30 Jun, 2QFY20 revenue plunged 90% QoQ to SGD41.3m from SGD406.9m in the preceding quarter with gaming revenue tumbling 98% to SGD6.5m from SGD267.9m. This led to a core net loss of SGD116.5m from core net profit of SGD53.2m. Similarly, on a YoY comparison, revenue contracted 94% from 2QFY19 while there was a core profit of SGD166.0m reported last year. YTD, 1HFY20 revenue fell 65% which led to a core net loss of SGD63.3m as opposed to core profit of SGD373.8m in 1HFY19.

COVID-19 pandemic took a heavy toll on earnings. The losses were highly anticipated given the lockdown in the island state for almost the entire quarter. Management did not share the casino statistic given that it only operated for five days for the quarter. Meanwhile, since the reopening on 1 July, it is only operating at 50% of gaming capacity given the stringent safety measurement and also it is only opened for members. Likewise, its theme park attractions also saw declining visitations and are still not breaking even at this stage. It mentioned about 20-30% opex cost cutting so far. Overall, management remains pessimistic in the near term given the virus outbreak that has restricted cross border travelling.

Maintain GENTING’s call for now. We are keeping our OUTPERFORM call, price target of RM6.00/share, which is based on 5-year mean discount of 42% to SoP of RM10.36, and earnings estimates for GENTING, unchanged for now, pending the release of its 2QFY20 results later this month-end. Given the virus disruption to the tourism industry, we expect substantial earnings cut in the coming weeks post GENTING’s earnings release. Risks to our call on GENTING include weak business volume and poorer luck factor.

Source: Kenanga Research - 7 Aug 2020