After reporting a 26% drop in 1QFY2021 net profit last week, analysts are saying Genting Singapore needs time to get back on its feet, as domestic visitors do little to fill gaming tables and other entertainment venues. 

While CGS-CIMB Research analyst Cezzane See is maintaining “add” on the integrated resort operator, See is lowering the target price to $1.00 from $1.05 with a 17.6% upside. 

“Genting Singapore’s 1QFY2021 revenue of $278 million fell 32% y-o-y/12% q-o-q, as expected. The y-o-y drop was due to a higher base as Singapore has been impacted by the Covid-19 outbreak since February 2020. On a sequential basis, we think the large revenue drop was due to the high base of 4QFY2020 non-gaming revenue, which was largely boosted by pent-up demand for year-end holidays/staycations/attraction visits. Gaming revenue was stable on a sequential basis (+2% q-o-q),” writes See in an May 8 note.

See: Genting Singapore posts 26% drop in 1Q21 net profit on continued Covid-19 impact

That said, 1QFY2021 adjusted EBITDA of $128 million indicated margins of 32%, down from elevated levels of 67% in 4QFY2020. “We believe the fall in margins could be due to: i) tapering government support, such as the Job Support Scheme (JSS); ii) a rise in operational costs as Resorts World Sentosa (RWS) developed creative events for promotions for domestic tourists; and iii) the lack of provision reversals that were partly taken in 4Q2020,” says See.

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“Thus, we trim our EBITDA margins for FY2021-2023F which leads to FY2021-2023F adjusted EBITDA falling by 4-9.4%,” she adds.

Nevertheless, See points to some upcoming revenue from RWS’ “continued development of attractions”, along with a temporary occupation permit for the re-modeled Resorts World Theatre for a new experiential dining attraction, Once a Pirate.

See also points to the extension of SingapoRediscovers Vouchers redemption from end-June to December, which could support domestic visitor counts.

See adds that Genting Singapore’s further recovery relies on Singapore’s borders reopening, but still prefers the company for its strong balance sheet, noting Genting Singapore’s end-FY2020 net cash position of $3.7 billion, “which will help tide it over the current tough times”.

The “slow start too FY2021” leads Maybank Kim Eng analyst Yin Shao Yang to trim Genting Singapore’s target price even further to 86 cents from 92 cents previously. While Yin maintains a “hold” call on the company, FY2021 is “likely to be another quiet year”.

“Unfortunately, [recovery to pre-Covid-19 levels this year] is increasing unlikely given the third Covid-19 wave in Malaysia. Recall that Malaysia is a key foreign market for RWS, especially its high margin mass market. Moreover, the Singaporean government announced on May 4 that the operating capacity of attractions, which includes integrated resorts like RWS, will be reduced from 65% to 50% due to a recent rise in Covid-19 cases in Singapore,” writes Yin in a May 9 note. 

RHB Group Research maintains “neutral” on Genting Singapore, while trimming its target price to 92 cents from 94 cents previously. 

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“Despite gaming revenue nudging up by 1.6% q-o-qq, 1QFY2021 total revenue dropped by 12%, as non-gaming revenue fell by 29% q-o-q. The stronger non-gaming revenue in the previous quarter was due to the school holidays, when domestic tourism spending rose following the implementation of various supports measures, such as the SingapoRediscovers vouchers,” says RHB in a May 10 note. 

“Post results, we cut FY2021F-2023F earnings by 19.8-5.2% as we factor in a slower earnings recovery, in view of the rise in global Covid-19 cases… While Genting Singapore is a beneficiary of a cyclical recovery… a full re-opening of Singapore’s borders may not take place in the near term, thereby dampening earnings recovery prospects.”

In a May 10 note, UOB Kay Hian Reearch analyst Vincent Khoo and Jack Goh calls Genting Singapore's 1QFY2021's results "unexciting". Nevertheless, the analysts are maintaining "buy" on the company, with a target price of $1.08.

"1Q2021 results came in below our expectation as non-gaming revenue plunged q-o-q, and gaming revenue remained flattish q-o-q unlike rival MBS [Marina Bay Sands]. Local patronage remained resilient but international footfall remained largely absent without meaningful border relaxations and the resurgence of Covid-19 cases globally. Nonetheless, we remain confident on better earnings recoveries in 2022 after the region’s dispensation of Covid-19 vaccines," writes Khoo and Goh.

In a May 11 note, OCBC Investment Research analyst Chu Peng is recommending "buy" on Genting Singapore. "Factoring in a slower recovery," however, Chu lowers its fair value to 96 cents from $1.02 previously. 

"We continue to see GENS as a beneficiary of the rollout of vaccines and gradual easing of travel restrictions," writes Chu. Potential catalysts include stronger-than-expected growth in Genting Singapore's VIP and premium mass volumes, and a faster-than-expected recovery from Covid-19, notes Chu. 

As at 12.13pm on May 12, shares in Genting Singapore are trading flat at 81 cents.