GENS posted a weaker 2HFY21 results with core profit falling 66% YoY to SGD38.0m, no thanks to the rise in COVID-19 community cases and Omicron variant. However, management is optimistic as more VLTs are opened up that allow travellers to enter the island state. In addition, GENS is moving forward with its RWS2.0 refurbishment program with capex of SGD400m, preparing for reopening. For now, we keep our call on GENTING unchanged pending its 4QFY21 results next Thursday.

GENS’ FY21 results below market expectations. Genting Singapore Ltd (GENS, Not Rated) reported 2HFY21 core profit which plunged 66% YoY to SGD38.0m from SGD115.m in 2HFY20 with revenue dipping 8%. This brought FY21 core profit to SGD149.5m which missed consensus forecast of SGD196.3m by 24%. At the adjusted EBITDA level, FY21 earnings of SGD448.0m matched our projection of SGD440.9m but fell short of consensus forecast of SGD511.7m. Besides, it declared a SGD0.01 DPS for FY21 which is the same as FY20.

A weaker 2HFY21. 2HFY21 core profit of SGD38.0m plummeted 80% from SGD186.9m in 1HFY21 and 66% from SGD111.5m in 2HFY20 as revenue tumbled 17% and 8%, respectively. This was largely due to a drop in business volume given the rise in COVID-19 community cases during the period as well as the emergence of the Omicron variant that restricted operating capacity and visitor arrivals. YTD, FY21 core profit jumped to SGD149.5m from SGD25.2m last year despite flattish revenue. This was due to it badly affected by COVID-19 when the pandemic first started in 2020.

Looking towards a better FY22. During the conference last evening, management sounded optimistic, for the first time since the virus outbreak, with more mutual VLTs to allow fully vaccinated travellers to enter Singapore without quarantine. As more travellers will return to the island state which should augur well for GENS. Meanwhile, GENS will be investing SGD400m in 2022 for RWS2.0 and related refurbishment works for theme park and three of its hotels to get ready for the borders reopening.

Recovery on the way; maintain OP on GENTING. Although the recent emergence of the Omicron variant saw cases spiking rapidly across the globe, the severity of the variant is relatively mild while more countries are entering into mutual VLT to allow travelling. This will benefit GENM and GENS and hence driving parent-company GENTING’s earnings. For now, pending the release of the group’s 3QFY21 results next Thursday, we are keeping our OP call and TP of RM6.47 (+1SD to 5-year mean at 41% discount to SoP valuation) and estimates unchanged on GENTING.

Risk to our call on GENTING is a prolonged COVID-19 pandemic continuing to restrict travelling and hence affecting its casino operations.

Source: Kenanga Research - 18 Feb 2022