MAYBANK Kim Eng (Maybank KE) has downgraded its call on Genting Singapore to " hold" from " buy" with a lower target price of S$0.89 compared to S$0.95 previously.

 

In a Wednesday report, the research house said it sees limited upside potential in the stock although earnings estimates remain relatively unchanged.

 

This comes after Genting Singapore on Tuesday posted a 90 per cent plunge in full-year net profit to S$69.2 million, which the integrated resort operator called the " worst financial performance since the opening of (its) Singapore Integrated Resort in 2010" .

 

Maybank KE analyst Yin Shao Yang noted that while the group' s H2 core net profit and final dividend per share (DPS) of one cent came in above expectations, the earnings outperformance was largely due to a reversal of impairment on trade receivables as well as reversal of bonuses.

 

He added that Genting Singapore' s underlying operations could have performed better as Q4 gaming revenue came in flat despite the resort being allowed to increase operating capacity to 50 per cent from 25 per cent from Sept 18, 2020 and admit all guests from Oct 9, 2020.

 

In comparison, its industry peer Marina Bay Sands (MBS) saw its Q4 gross gaming revenue (GGR) grow 12 per cent quarter on quarter in US dollar terms. This suggests Genting' s casino resort Resorts World Sentosa (RWS) ceded GGR share in Q4 and therefore could not emulate MBS in growing its gaming revenue in tandem with the lifting of operating capacity limits, the analyst said.

 

" RWS was allowed to increase operating capacity from 50 per cent to 65 per cent from Dec 28, 2020 but Genting Singapore still does not expect its GGR to improve markedly on lack of foreign gamblers&hellip Furthermore, Genting Singapore also does not expect the VIP market to recover to pre-Covid-19 levels due to China cracking down on anyone enticing mainland Chinese to gamble overseas," commented Mr Yin.

 

In separate Wednesday reports, UOB Kay Hian (UOBKH) and CGS-CIMB maintained their " buy" and " add" calls on the stock at the respective target prices of S$1.08 and S$1.05.

 

Contrary to Maybank KE, both research houses are positive on the group' s latest set of earnings which they view as a reflection of increasing market share.

 

UOBKH deems Genting Singapore' s GGR recovery " impressive" and believes the group' s Q4 earnings were more resilient than that of MBS in terms of revenue and earnings before interest, taxes, depreciation and amortisation (EBITDA) - which beat consensus estimates.

 

" Despite international borders remaining sealed in Q4 2020 and limited gaming capacity due to stringent social distancing set-ups, RWS' s gaming volume recovered by 2.8 per cent quarter on quarter to about two-thirds of the pre-pandemic level. The recovery was mostly driven by the local market (mass and premium mass segments), and we understand that the VIP win rate was within the theoretical range," said the UOBKH analysts.

 

CGS-CIMB analyst Cezzane See said she thinks the group' s stable H2 gaming revenues and EBITDA margins point to its resilience. She continues to like Genting Singapore for its medium-term prospects and strong balance sheet, which she believes will " help tide (the group) over the current tough times" .

 

Meanwhile, RHB remained " neutral" on the stock but has raised its target price to S$0.94 from S$0.72 previously after rolling forward its valuation base year to FY2022.

 

" While Genting Singapore is a beneficiary of a cyclical recovery, we maintain our ' neutral' call. This is as the current mean valuation is fair, following the new-found share price strength, while a full border reopening may not take place in the near term, dampening the earnings recovery prospects," said its research team in a report on Wednesday.

GENTING Singapore on Tuesday posted a 90 per cent plunge in full-year net profit to S$69.2 million, which the integrated resort operator called the " worst financial performance since the opening of (its) Singapore Integrated Resort in 2010" .

 

This was despite the group' s implementation of cost-containment measures and aid from the Singapore government amid the Covid-19 pandemic, Genting Singapore said.

 

Two-thirds of the net profit was attributable to the better performance before the Chinese New Year in the first quarter of 2020, prior to the onset of the Covid-19 pandemic in Asia.

 

Regulatory restrictions, border closures and operating capacity restrictions subsequently dragged down the group' s performance in the remainder of the year.

 

Revenue for the year ended Dec 31, 2020 slid 57 per cent to S$1.1 billion, while gross profit fell 77 per cent to S$231.9 million.

 

The gaming segment churned out revenue of S$700.8 million, a 57 per cent decrease, while the non-gaming segment posted revenue of S$299.4 million, 65 per cent lower than a year ago.

 

However, revenue from the investment business, along with other hospitality and support services, grew several times to S$63.5 million from S$2.8 million.

 

Other operating expenses increased to S$25.6 million from S$4.6 million, while finance costs fell 80 per cent to S$4 million.

 

Net profit for the second half of 2020 decreased 41 per cent from the corresponding period in 2019 despite efforts by the group that helped bump up visitations by local residents to Resorts World Sentosa (RWS).

 

Earnings per share was 0.57 Singapore cents, down from 5.71 cents a year ago.

 

The board is recommending a final dividend of one Singapore cent per ordinary share for the full year. No interim dividend was declared.

 

For the previous financial year ended Dec 31, 2019, a final dividend of 2.5 cents per share and an interim dividend of 1.5 cents per share was paid to shareholders.

 

Genting Singapore said it is evident that international travel is unlikely to return to pre-pandemic levels anytime soon. The group will continue to pursue its growth strategy with the S$4.5 billion mega expansion to anchor RWS as Asia' s leading leisure and tourism destination, it said.

 

The group is also engaging relevant stakeholders with regard to the opportunity of developing an integrated resort in Yokohama, Japan.