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Genting Singapore’s weak performance from 1Q20 likely to continue into 2Q20: analysts

Felicia Tan
Felicia Tan • 3 min read
Genting Singapore’s weak performance from 1Q20 likely to continue into 2Q20: analysts
Analysts believe Genting Singapore’s 2Q20 results are likely to fare worse than its 1Q20 results.
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SINGAPORE (May 21): Analysts believe Genting Singapore’s 2Q20 results are likely to fare worse than its 1Q20 results. However, Maybank Kim Eng analyst Yin Shao Yang and CGS-CIMB analyst Cezanne See believe future quarters for the integrated resort are likely to pick up on the back of the easing Covid-19 measures, and rebound in tourism numbers.

See also: Genting Singapore's 1Q earnings tumble 55% to $149 mil as Covid-19 impact turns 'devastating'

Maybank Kim Eng’s Yin has slashed his FY2020 earnings estimate by 87%, following Genting Singapore’s lacklustre 1Q20 revenue and EBITDA, which came in at just 19% of his earlier full year estimate. He trimmed his estimates for FY21E/FY22E by a modest 5% each on prospects of recovery after 2Q20, with visitors seen to gradually return on lowered Covid-19 cases in Singapore and Malaysia.

Yin believes that even with the earnings plunge, Genting Singapore will still deliver a yield of more than 5% as it is seen to maintain its dividend of four cents per share for FY2020, thanks to its “solid” net cash position of 31 cents per share as at end FY2019. Genting Singapore will be well supported by its dividend payout, which Yin figures will yield more than 5%.

Furthermore, its price to book value, estimated at 1.2 times for FY2020, is also “not expensive”.

Yin has maintained Genting’s “buy” call with a revised target price of 81 cents, from 84 cents previously.

See also: CGS International keeps ‘hold’ call on Paragon REIT with lowered TP following divestment of Rail Mall

Similarly, CGS-CIMB’s See has rated Genting Singapore a “buy”, with a 76.2 cents price target. She is optimistic that longer term prospects will improve, as it is one of the only two integrated resorts in Singapore and that the tourism industry “could rebound” from 2021 onwards.

Just like Yin, See is banking on Genting Singapore’s health net cash position to sustain dividends for this year and tide the company through this difficult period.

While Yin has trimmed his earnings estimates for FY21 and FY22 by 5%, See is keeping her forecast for now.

See also: RHB likes ST Engineering for its contract wins and record order book, keeps ‘buy’ and TP

See is also optimistic on Genting’s FY21-22F numbers, with a relatively unchanged earnings per share forecast for FY21-22F, as she believes Singapore’s tourism industry “could rebound” from 2021 onwards.

Genting’s 1Q20 adjusted EBITDA of $146 million came in at about 22.5% of CGS-CIMB’s FY20F forecast, but it remains in line at 28% of the consensus’ $518 million.

On the other hand, RHB analyst Juliana Cai has changed her call on Genting Singapore from “buy” to “take profit”. From a recent low of 51 cents, Genting Singapore has rebounded by some 52.0%.

While the company’s 1Q20 results are largely in line with her forecasts, she is not optimistic that recovery will be as swift.

“We expect 2Q20 numbers to be impacted further, as Genting Singapore halted almost all operations to comply with Singapore’s “circuit breaker” regulations. Even though the “circuit breaker” is expected to end on 1 Jun, we believe restrictions will only be lifted in phases – and Genting Singapore’s operations may remain suspended in the near term,” she says.

“Nevertheless, GENS’ strong balance sheet [with net cash of $3.7 billion as at Dec 31, 2019] should enable it to tide through this difficult time,” she notes.

If the share price drops below 59 cents again, Cai recommends investors with a longer-term view to buy some.

As at 12.08pm, Genting Singapore’s shares are changing hands at 77.5 cents, up 1.3%.

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