GENS saw earnings recovery in 1QFY22 with core profit jumping 263% sequentially to SGD43.5m as the preceding quarter was hit by sharp decline in business volume as spiking COVID-19 cases restricted operating capacity and visitor arrivals. Business volume should turn upward further with the reopening of international borders from April 1. For now, we keep our OP call on GENTING unchanged pending its 1QFY22 results later this month- end.

Satisfactory GENS’ 1QFY22 results. In a quarterly business overview released yesterday, Genting Singapore Ltd (GENS, Not Rated) reported 1QFY22 core profit which jumped to SGD43.5m from SGD12.0m in the preceding quarter when business volume fell sharply. While the core earnings only made up 13% of consensus’ FY22 forecast, we deem the results as within expectations as stronger forward earnings are anticipated following the island state reopening its international borders to fully vaccinated travellers from April 1. At the adjusted EBITDA level, 1QFY22 earnings of SGD43.5m accounted for 17%/18% of house/street’s FY22 estimates.

Recovered from the weak 4QFY21. 1QFY22 core profit bounced from a weak core profit of SGD12.0m in 4QFY21 which as mentioned above was owing to lower business volume due to the restriction of operating capacity and visitor arrivals as COVID-19 community cases spiked as well as the emergence of the Omicron variant which hit the preceding quarter badly. Meanwhile, in YoY comparison, 1QFY22 core profit dipped slightly by 2% to SGD43.5m from SGD44.5m previously partly due to higher utilities expenses and the expiry of COVID-19 related government support measures.

A better FY22 as Singapore has reopened its international borders from April 1 which could mean GENS is likely to experience growing volume from 2QFY22 onwards. Meanwhile, in the business review note, management is cautiously optimistic of the recovery trajectory in view of the border reopening as more travelers will return to the island state which should augur well for GENS. It had earlier disclosed investing SGD400m in 2022 for RWS2.0 and related refurbishment works for the theme park and three of its hotels to get ready for the borders reopening.

A recovery is on the way; maintain OP on GENTING. We believe the two years of lackluster earnings at GENS is likely ending with earnings recovery expected from 2QFY22 given the reopening of international borders from April 1. And, the same would apply to GENM as well. This should eventually benefit parent-company GENTING as well. For now, pending the release of the group’s 1QFY22 results this month-end, we are keeping our OP call and TP of RM6.12 (+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/resurging COVID-19 pandemic continuing to restrict travelling and hence affecting its casino operations.

Source: Kenanga Research - 13 May 2022