Genting Singapore shares jump on surprise earnings rebound

Genting Singapore's Q3 revenue and earnings beat market expectations, with local gamblers helping to drive the company back into the black. ST PHOTO: GAVIN FOO

SINGAPORE (THE BUSINESS TIMES) - Shares of integrated resort operator Genting Singapore, its Malaysian counterpart and their parent company all surged on Monday (Nov 16), boosted by a sharp quarter-on-quarter turnaround in the Singapore firm's bottom line.

Genting Singapore shares climbed as much as 9.1 per cent to hit 82 cents at around 11.52am.

It eased slightly to 81.5 cents by the midday break, up seven cents or 9.4 per cent from the previous close. About 61.8 million shares changed hands, making it the second most-traded by value and third by volume on the Singapore market for the morning.

The last time Genting Singapore shares reached such levels was in early June this year.

Its Malaysia-listed parent, leisure and hospitality giant Genting Berhad, rallied 8.7 per cent or RM0.33 to a four-month high of RM4.12 as at 12.05pm with 27.8 million shares traded.

Genting Malaysia, which operates Resorts World Genting, rose 4.9 per cent or RM0.12 to RM2.55 as at 12.25pm, with 32.2 million shares changing hands.

The Singapore unit's Q3 revenue and earnings beat market expectations, with local gamblers helping to drive the company back into the black.

Net profit after tax stood at $54.4 million for the quarter to September, reversing from the net loss of $163.3 million in the previous quarter. However, on a year-on-year basis, this was still a decline of 65.7 per cent from a net profit of $158.9 million previously.

The sequential rebound came as Resorts World Sentosa (RWS) generated higher-than-expected gaming revenue of $213 million in the latest quarter, RHB wrote in a note on Monday.

Hence, the Q3 2020 net profit forms a strong baseline for earnings moving forward, and brings brighter prospects, RHB analyst Juliana Cai said.

She upgraded the stock to "neutral" from "sell", and raised the target price to 72 cents from 62 cents previously.

The company's business update on Saturday suggests that it is able to generate an annualised earnings before interest, taxes, depreciation, and amortisation (Ebitda) of $500-600 million, even in the absence of tourist spending and capacity limitations, Ms Cai added.

"The positive operating cash flow generated, coupled with its existing net cash of $3.6 billion as at June 30, gives confidence that the group has sufficient capital to fund its RWS expansion mega capital expenditure of $4.5 billion over the next four to five years," she said.

While the surprise Q3 earnings could be due to pent-up local demand after a prolonged lockdown, the absence of such demand in Q4 could be offset by school holidays and easing capacity restrictions on attractions, according to RHB.

In view of the improving prospects, RHB also expects Genting Singapore to resume dividends at the end of this year, with a likely dividend of two cents per share.

Ms Cai said tourists are likely to return to half of pre-Covid-19 levels by the fourth quarter of 2021 as borders gradually reopen.

Singapore's stabilising Covid-19 situation and the positive news flow on vaccines should also support the share price in the near term, she added.

Maybank Kim Eng (MKE) on Sunday maintained its "hold" call on Genting Singapore with a slightly higher target price of 78 cents, from 76 cents previously.

The brokerage noted that Genting Singapore's Q3 results surprised on the upside, likely due to local gamblers remaining in the city-state to gamble.

Nine-month core net profit would amount to about $9.9 million, which exceeds MKE's forecast as the brokerage had expected a full-year net loss.

The outperformance was largely thanks to nine-month net gaming revenue falling 60 per cent year on year - 14 percentage points narrower than what MKE expected.

Drawing insights from the results of RWS rival Marina Bay Sands (MBS), MKE analyst Samuel Yin wrote that RWS' high-margin gross gaming revenue (GGR) from slot machines also probably did not fall much year on year as local gamblers had to stay in Singapore as they could not cross into Malaysia to gamble.

Mr Yin pointed out that for the first time in nearly a decade, RWS generated higher quarterly Ebitda than MBS.

He more than quadrupled his FY20 Ebitda estimate for Genting Singapore, as he now forecasts mass market (tables and slot machines) GGR to fall by a narrower 50 per cent year on year.

RWS in July started to welcome guests back to Universal Studios Singapore and S.E.A. Aquarium, as the Republic entered phase two of its gradual reopening. However, in its business update on Saturday, Genting Singapore said demand remained "weak" at the integrated resort.

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