• Genting Singapore (SGX:G13)’s 4Q19 results are in line. For the full year, it recorded an adjusted EBITDA of SGD1.2bn and PATMI of SGD689m, which made up 102% of our FY19 estimates.
• In view of the novel coronavirus outbreak, we expect the tourism sector to take a hit in 1H20. We cut FY20F adjusted EBITDA by 11%, which in turn lowers our target price.

4Q19 Results Supported by Positive Luck Factor

• Genting Singapore's 4Q19 gaming revenue grew 7.5% q-o-q but was down 12.8% y-o-y. We note that this was held up by the positive luck factor, as the VIP win rate increased to 3.4% from 2.7% in 3Q19.
• Both VIP and mass gaming volumes were on a declining trend due to the increase in casino tax levy and management’s strategy of tightening credits towards VIPs.

Pessimistic on 1H20 Outlook

• Aside from a normalising win rate, we expect 1H20 earnings to take a hit as the novel coronavirus outbreak disrupts the tourism industry in Singapore.
• Singapore has imposed an entry ban on all Chinese visitors and foreigners with a recent travel history to China. This is likely to impact the bulk of Genting Singapore gamers. On top of that, about 20% of visitors that visit Genting Singapore’s attractions are also from Mainland China. Travellers from other countries are also likely to avoid Singapore, given that it has the highest number of novel coronavirus cases outside of China. MICE activities at hotels are expected to decline.
• Currently, we assume the travel ban to last for a quarter, and cut our FY20F EBITDA by 11% and PATMI by 14%.

Strong Dividend Yield and Potential Catalyst to Support Share Price

• Genting Singapore declared a final DPS of SGD0.025, bringing total DPS to SGD0.04. We expect the group to maintain dividends at this level, as management highlighted its desire to keep dividends consistent during the analyst briefing.
• We also believe it has adequate cash to maintain dividend payouts, despite an earnings blip in FY20F caused by the outbreak.
• Maintain NEUTRAL, new target price of SGD0.85 with 3% downside and 5% FY20F yield.
• Genting Singapore has submitted the request-for-proposal for both the Osaka integrated resort (IR) and Yokohama IR. Winning one of the IR bids would be a positive catalyst for the stock.
• As the winning bids for the IRs are expected to be announced in 3Q or 4Q this year, coupled with Genting Singapore’s strong dividend yield of 4.6%, we believe its share price should remain bouyed at current levels.

Source: RHB Invest Research - 13 Feb 2020