Analysts positive on Genting Singapore amid 'crisis' valuations

Analysts positive on Genting Singapore amid 'crisis' valuations

Stanislaus Jude Chan
09/11/18, 12:04 pm

SINGAPORE (Nov 9): Analysts are staying positive on Genting Singapore (GENS) amid a selldown which they say is “unjustified”.

Since reporting its 2Q18 results after market close on Aug 3, GENS has seen its share price plunge close to 28%. Shares in GENS closed at $1.23 on Aug 3, and closed at 89 cents on Nov 8.

“In our view, GENS is unjustifiably trading at ‘crisis’ valuations of 5.4x FY19 EV/EBITDA or nearly half the 5-year mean and 1.3x FY19 P/BV or only 0.1x above the Global Financial Crisis trough,” says Maybank Kim Eng Research analyst Yin Shao Yang in a Friday report.

The brokerage is upgrading GENS to “buy”, from “hold” previous, and raising its target price by 3 cents to $1.29.

Over at CGS-CIMB Research, lead analyst Cezzane See agrees that GENS is “unduly pricing in crisis levels”.

“Market [is] unduly pricing in watershed valuations,” See says in a Thursday report. “At 5.8x FY19F EV/EBITDA, the market is pegging GENS to trough valuations of end-FY15 to FY16.”

As she explains it, GENS’ adjusted EBITDA was below $900 million, trade receivable impairments were above $230-260 million per annum, and receivables balance was above $200 million during that period.

“9M18 adjusted EBITDA, trade receivable impairments and end-Sep 18 trade receivable balances are on relatively firmer footing,” See says.

As such, CGS-CIMB is keeping its “buy” call on GENS. However, the brokerage is lowering its target price to $1.28, from $1.44. According to See, the lower target price is “just to be cautious on global uncertainties”.

Meanwhile, Maybank’s Yin says he is “pleasantly surprised” by GENS’ 3Q18 results.

GENS before market open on Nov 9 announced a 46% rise in 3Q18 earnings to $210.4 million from $143.8 million a year ago on lower operating expenses.

Revenue for 3Q18 rose 1% to $639.1 million from a year ago as the group’s revenue continued to grow.

See: Genting Singapore reports 46% rise in 3Q earnings to $210.4 mil on lower operating expenses

“Genting Singapore’s 3Q18 solid performance was due to solid growth in its overall gross gaming revenue (GGR) from both VIP and mass segments,” says RHB’s Singapore Research team, adding that the results were “within expectations”.

“We still like Genting Singapore for its continued focus on growing its VIP segment, and its potential expansion to the Japan market,” RHB says. “We believe the stock is undervalued – since it is trading at a relatively low P/E of 13x, vs the peer average of 18x.”

Amid a transfer of coverage, RHB says it is placing its estimates and target price under review. The brokerage has a “buy” call on GENS with a target price of $1.42.

As at 11.59am, shares in GENS are trading 7 cents higher, or up 7.9%, at 96 cents.

According to Maybank valuations, the stock has an estimated price-to-earnings ratio of 12.9 times and a dividend yield of 3.9% for FY19.

Bad call

Despite assertions otherwise, the US blacklisting of Huawei Technologies looks aimed at crippling its business. But in this age of globalised business, it could backfire. SINGAPORE (May 27): Chinese telecommunications equipment maker Huawei Technologies has become a proxy in the trade war between the US and China. But Washington’s latest salvo could invite detrimental consequences. Given that China commands much of the global technology supply chain — from raw materials to component manufacturing and final assembly — if Beijing decides to retaliate by, say, barring exports of rare ear....

Opportunities in Singapore

SINGAPORE (May 27): The escalating trade war between the US and China may not be entirely bad news for Singapore. After an initial dampening as trade through the city state slows, the country could actually benefit from this global turmoil as companies relocate parts of their supply chain to the Asean region, say experts. That movement is already evident. The US business lobby in China, the American Chamber of Commerce of China, surveyed 239 of its members from May 16 to 20 — after both China and the US raised tariffs on each other’s imports — and found that 40.7% had relocated manufa....

Design-led businesses outperform peers

SINGAPORE (May 27): Mark Wee, executive director of DesignSingapore Council, is all too familiar with the narrow definition of “design”. Asked what it is, the response from any given audience would typically be “fashion design” or “interior design”. As head of the government agency helping to develop Singapore’s design sector, Wee is now on a mission to demystify the approach to design and show that there is a wider meaning and deeper purpose to design than just aesthetics. “Design can be extremely strategic in creating a new value,” says Wee in an interview with The Edge ....