• Keep BUY and SGD0.95 TP, 19% upside, c.3% FY22 yield. We are reassured of our recovery thesis on Genting Singapore after dialling into Las Vegas Sands’ (LVS) 1Q22 earnings call. Marina Bay Sands’ (MBS) 1Q22 performance showed signs of improvement, and LVS’ management is upbeat on Singapore’s prospects, driven by the return of visitors, and potential diversion of visitors from Macau to Singapore. We continue to think FY22 will be a strong recovery year for GENS.

• 1Q22 recovery across the board at MBS. At a 1-year high, MBS’ casino revenue is still at <50% of pre-pandemic levels, but is steadily recovering. Its hotel occupancy stood at 84%, a 2-year high, and exceeded 1Q20’s 81%. However, its ADR is still down c.40% and RevPar remains down c.50% from pre-pandemic levels. Mall revenues are almost at pre-pandemic levels of c.USD50m/quarter, with a healthy occupancy rate of 99%. MBS’ rolling chips volume is still only at c.25% of pre-pandemic levels, while non- rolling chips volumes are at c.60% of pre-pandemic levels – both have been steadily improving from previous quarters.

• LVS’ management upbeat on Singapore. While MBS’ hold-normalised adjusted property EBITDA is still at <30% of pre-pandemic levels, management pointed to the MoM improvements in 1Q22 and is optimistic about MBS’ prospects. Management believes that the coming months for MBS will be stronger, as Singapore has already reopened its borders and lifted most COVID-19-related restrictions. Tourists deterred by Macau’s strict COVID-19 restrictions may also turn to Singapore. Overall, LVS’ management expects a return in both VIP and mass market gamblers, and recovery across MBS’ other segments as well.

• Good signs for GENS. We believe the key drivers of MBS’ recovery should also benefit GENS, such as the reopening of Singapore’s borders and potential diversion of visitors from Macau to Singapore. While the strict lockdowns in China will likely continue to weigh on GENS’ VIP segment, the return of visitors from GENS’ other markets (Malaysia, Indonesia, South Korea, Japan) should still drive meaningful recovery. Based on MBS’ 1Q22 results and outlook, we believe GENS should also see an uptick in gaming and non-gaming revenues in 1Q22.

• We maintain our forecasts, as LVS’ 1Q22 results and outlook aligns with our recovery thesis for GENS. We keep our SGD0.95 TP, which includes a 2% ESG discount. Our valuation is based on 8.5x EV/EBITDA, which we think is undemanding relative to regional peers’ 11x, especially as GENS currently has brighter prospects. Our BUY call is premised on: i) A 2-year earnings CAGR of 92%, and ii) potential upside in dividends.

• Key risks: The re-closure of international borders, negative luck factor, and regulatory risks.

Source: RHB Research - 28 Apr 2022