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Maybank lowers Genting Singapore's TP to 83 cents with FY2022 earnings likely to be 'flattish'

Felicia Tan
·2-min read

"We expect Genting Singapore’s earnings to remain uninspiring for another year," says Maybank Securities analyst Yin Shao Yang.

Maybank Securities analyst Yin Shao Yang has maintained “hold” on Genting Singapore as "grey clouds" linger around the counter.

Yin has also reduced his target price estimate to 83 cents from 86 cents previously, as he rolls his valuation base forward to end-FY2022. He has also raised his weighted average cost of capital (WACC) “a tad” to 13.1% from 12.3%.

Citing the suspension of the vaccinated travel lane (VTL) between Singapore and Malaysia by land, Yin predicts Genting Singapore’s earnings to be “flattish” for yet another year.

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According to Yin in a Jan 17 report, Malaysians were estimated to contribute some 20% to 30% to Resorts World Sentosa’s (RWS) VIP volume and RWS’s mass market gross gaming revenue (GGR) before Covid-19. Before the pandemic, an estimated 250,000 Malaysians entered Singapore by land daily.

Due to the suspension of the land VTL between both countries, Yin predicts that the coming Chinese New Year festivities is also likely to be “another quiet one” for Genting Singapore.

“With no guarantee that [the land VTL] will resume, we fear that not many Malaysians will gamble at the Singaporean integrated resorts (IRs) during the peak Chinese New Year period,” writes Yin.

In addition, the analyst expects competition for the counter’s premium mass market to intensify in the longer term.

“The arrest of Macau’s junket ‘king’, Alvin Chau, has put US$19.3 billion ($26.02 billion) of VIP GGR at risk in Macau, Philippines and Cambodia. Note that the 2019 Singapore total GGR was only SG$6.2 billion or US$4.5 billion,” explains Yin.

“Channel checks inform us that it is virtually certain that the IRs in Macau, Philippines and Cambodia will target the premium mass gamblers that frequently gamble in Singapore to try and plug the aforementioned gap when borders reopen. Competition from Cambodia will be most intense,” he adds.

In his view, the current estimates made by consensus are “aggressive”. Yin himself has reduced his core net profit for the FY2022 by 72% as he does not see Genting Singapore’s GGR recovering materially during the year.

Given that the FY2021 is over, Yin has kept his estimates for the year unchanged.

He has also cut his earnings estimates for the FY2023 by 54% to reflect the delayed return of Malaysian gamblers, who were predicted to return in FY2022 previously.

“Essentially, we expect Genting Singapore’s earnings to remain uninspiring for another year making it three years of pedestrian earnings,” says Yin.

Shares in Genting Singapore closed flat at 78 cents on Jan 18, or an FY2021 P/B of 1.2 times and dividend yield of 1.3%.

Photo: Samuel Isaac Chua/The Edge Singapore

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