• Genting Singapore issued a profit guidance for 1Q20 and 1H20 financial results to be adversely affected by Covid-19, but the extent was unquantifiable.
• Cost control measures have kicked in, including a 9-18% base salary cut for managerial staff and executive directors, as well as unpaid leave.
• FY20-21F EBITDA is lowered to S$652.2m and S$918m, respectively. Our SOP-based Target Price is now S$0.76, now based on 7x CY21F EV/EBITDA.

Stumped by Travel Restrictions

• Genting Singapore (SGX:G13) expects its 1Q20F and 1H20F financial results to be significantly and adversely impacted, compared to the corresponding periods in the previous year. The group said that it has experienced a significant decrease in visitor attendance and correspondingly revenue, across all of its facilities, including its tourist attractions, hotels, restaurants, meetings, incentives, conferences and exhibition (MICE) facilities and the casino.
• Genting Singapore said the extent of financial impact for FY20F is unquantifiable due to uncertainty over the duration and extent of the spread of the virus.

We Lower Mass Gaming Revenue by 40% and VIP by 50%

• We estimate in the VIP segment, North Asian players could account for 50%, while Southeast Asian (SEA - including Indonesia and Malaysia) could account for another 30% in general. Within the mass segment and stripping out local players (we estimate 10-15%), North Asians could account for 40-50%, and SEA 30% of total international volume.
• In the wake of the global pandemic, we estimate the total fall in Singapore tourist volume could be steeper than the 30% y-o-y drop previously guided by the Singapore Tourism Board; hence, we estimate a 50% y-o-y fall in rolling chip volume for VIP and 40% y-o-y drop in mass gaming.
• We also expect the non-gaming segment to drop by 30% y-o-y in revenue. As such, we now expect adjusted EBITDA for FY20F to be S$652m (-45% y-o-y) and recover to S$918m in FY21F assuming a 10% recovery in volumes. Our EBITDA cuts result in FY20-22F EPS falling 19.3-52.2%.

Net Cash Per Share Stronger Now Vs. 2015/16; Reiterate ADD

• Reiterate ADD, with higher visitors (thus potential revenues) and lower capex spending as potential catalysts. Downside risks are lower Singapore tourists, and cut in dividend yields.
• In the near term, we think Genting Singapore Share Price could trade at a low of 5x FY20F EV/EBITDA, or S$0.50, replicating its valuations in 2016 when it was plagued by bad debt provisions following the tough credit conditions and lower visitation from Chinese VIP players.
• Our SOP Target Price is now based on 7x (vs. 8.0x previously) FY21F EV/EBITDA (-1 s.d. of mean since 2011, the first full year the casino was opened); to account for the near-term weakness in the stock.
• The difference between now and 2016 is stronger FY20F net cash of S$2.7bn (vs. 2016 estimated net cash ex-perpetuals of S$1.4bn) and lower trade receivable impairments of S$90m (vs. FY14-16 average of S$255m).

Source: CGS-CIMB Research - 17 Mar 2020