GENS reported a soft 1HFY21 results with core profit falling 40% to SGD111.5m from 2HFY20, as the 1-month movement control due to the resurgence of COVID-19 cases, stymied earnings recovery. Nonetheless, with the island state eyeing to re-open its borders for tourism next month, this should help recovery further. As such, we expect a better 2HFY21. For now, we keep our call on GENTING unchanged pending its 2QFY21 results later this month-end.

A soft 1HFY21 at GENS. Genting Singapore Ltd (GENS, Not Rated) reported 1HFY21 core profit of SGD111.5m, from core loss of SGD161.7m a year ago, below expectation, making up only 31% of market consensus as the 1-month movement control triggered by the resurgence of COVID-19 cases, delayed business recovery. At the adjusted EBITDA level, 1HFY21 earnings of SGD276.1m made up 42%/44% of house/street’s FY21 estimates. No dividend was declared during the period of 1HFY21, as expected.

Resurgence of COVID case delayed recovery. While revenue was flattish at SGD276.9m, 2QFY21 core profit rose 51% QoQ to SGD67.0m from SGD44.5m which could be due to higher reversal of impairment on trade receivable. It reported SGD24.7m in reversal of impairment on trade receivable in 1HFY21. Compared to the immediate half-yearly results in 2HFY20, 1HFY21 core profit fell 40% to SGD111.5m from SGD186.9m as revenue fell 10% to SGD554.8m given the movement tightening mentioned above. In addition, there was higher reversal of impairment on trade receivable at SGD35.8m in 2HFY20.

Still a good recovery from last year nonetheless as a turnaround in 1HFY21 with core profit of SGD111.5m from core loss of SGD161.7m last year as revenue rose 24% to SGD554.8m from SGD448.2m. This was primarily owing to most operations at Resorts World Sentosa being halted for almost three months from 6 Apr to 30 Jun last year. Besides higher revenue, cost cutting effort and a reversal of impairment on trade receivables of SGD24.7m from a net impairment of SGD13.1m helped to improve earnings higher. This boosted EBITDA to SGD276.1m from SGD66.7m last year.

Border re-opening to drive recovery further, given the limited local market size due to cross border restrictions. As such, being one of the best managed countries under these pandemic times, Singapore is eyeing to open its borders for tourism next month when 80% of its population is vaccinated. Thus, we expect a better 2HFY21 with a recovery to pre-pandemic level only in 2022, nonetheless.

GENS still lead near-term group’s earnings; keep OP on GENTING. With the rising COVID-19 positive cases especially in the Klang Valley, GENM’s immediate earnings prospects are challenging. Thus, GENS is expected to lead GENTING’s near-term earnings. For now, pending the release of the group’s 2QFY21 results later this month-end, we are keeping our OUTPERFORM call at a target price of RM6.05 (+1 SD to its 5-year mean discount at 41% to SoP valuation) and estimates unchanged. Risk to our call on GENTING is a prolonged COVID-19 pandemic continuing to restrict traveling and hence affecting its casino operations.

Source: Kenanga Research - 13 Aug 2021