GENS reported a better-than-expected 3QFY20 results with revenue recovering to half of the pre-pandemic level. This led to a turnaround in earnings with core profit of SGD73.2m. With vaccines at the final stages prior to commercialisation, better prospect for cross border travelling re-opening is a positive for GENTING. For now, we keep our call on GENTING unchanged pending its 3QFY20 results later this month end.

GENS’ 3QFY20 results better than expected. In a quarterly business overview released last Saturday, Genting Singapore Ltd (GENS, Not Rated) reported a turnaround with core profit of SGD73.2m in 3QFY20 from core loss of SGD116.5m in the preceding quarter, netting YTD 9MFY20 core profit of SGD9.9m against market consensus FY20 net loss of SGD158.7m. The stronger-than-expected set of results was attributed to higher-than-expected revenue as it reopened for business from July 2020. At the adjusted EBITDA level, 9MFY20 earnings of SGD215.7m beat house/street’s FY20 full-year estimate of SGD147.3m/SGD151.5m.

Nice bounce in revenue. Sequentially, the earnings turnaround in 3QFY20 was due to higher revenue which jumped 628% to SGD301.0m from SGD41.3m in 2QFY20 which was only 26% lower than that of SGD406.9m in 1QFY20, which was fairly encouraging as it indicated a good recovery in business volume. In fact, 3QFY20 core profit of SGD73.2m was higher than that of SGD53.2m in 1QFY20. YoY, 3QFY20 core profit contracted 53% from SGD155.2m to SGD73.2m as revenue declined 50% from SGD596.1m while YTD 9MFY20 core profit plunged 98% to SGD9.9m from SGD529.0m on the back of 60% tumble in revenue to SGD749.2m from SGD1.87b.

Awaiting more recovery. In last quarter’s conference call in Sep, management indicated that it was operating at 50% of gaming capacity since the re-opening on 1 July 2020. This was somewhat reflected in 3QFY20 revenue of SGD301.0m which was half of the usual quarterly revenue pre-pandemic period. With vaccines against COVID-19 in their final stages before commercialising, better prospect for cross-border re- opening should help to boost stock sentiment. In our view, we only expect a recovery to pre-pandemic level in 2022. On the other hand, GENS still indicated that it is keenly exploring the Yokohama integrated resort opportunity in Japan.

Results are positive; maintain OP on GENTING. Although it is still half way from a full recovery, the surprisingly strong set of 3QFY20 results should boost sentiment for GENS and thus parent company GENTING. For now, we are keeping our OUTPERFORM call on GENTING and price target of RM5.10/share which is based on 5-year mean discount of 42.7% to SoP of RM8.89, pending the release of its 3QFY20 results later this month-end. Risks to our call on GENTING include weak business volume and poorer luck factor.

Source: Kenanga Research - 16 Nov 2020