• Genting Singapore’s 1Q20 results are largely in line with our forecasts, with EBITDA plunging 55% y-o-y to SGD147m.
• Downgrade to TAKE PROFIT from Buy, SGD0.64 Target Price, 12% downside with 5.5% FY20F yield.
• Nevertheless, Genting Singapore’s strong balance sheet should enable it to tide through this difficult time. We recommend that investors buy on dips.

Harder Times to Come

• Genting Singapore (SGX:G13)'s 1Q20 results are in line, as we expect a poor set of FY20 numbers, in view of the pandemic. We expect 2Q20 numbers to be impacted further, as Genting Singapore halted almost all operations to comply with Singapore’s “circuit breaker” regulations.
• Even though the “circuit breaker” is expected to end on 1 Jun, we believe restrictions will only be lifted in phases – and Genting Singapore’s operations may remain suspended in the near term.

Prolonged Pandemic Poses Downside Risks

• At current valuations, we see downside risks arising from a slower recovery in Genting Singapore’s performance, if the pandemic remains widespread and protracted. While the Government is in discussions with other countries on lifting travel restrictions with safeguards in place, we think that will take some time to implement as COVID-19 continues its global rampage.
• Countries with declining COVID-19 cases will also need to be monitored, for any resurgence in cases after their lockdowns ease. As such, we believe short-term international travel for leisure could take a longer time to resume. Tourism may also not recover in a significant way, as travellers remain wary of potential infection.

We Recommend That Investors TAKE PROFIT

• We recommend that investors TAKE PROFIT at the current share price levels, as a swift recovery is unlikely in the near term.
• Nevertheless, we note that Genting Singapore has a strong balance sheet and net cash of SGD3.7bn as at 31 Dec 2019 – which should help it weather through the long winter. We recommend longer-term investors to accumulate on dips, if Genting Singapore Share Price falls below SGD0.59, which implies 5.5x average FY20- 21F EV/EBITDA (or -1SD from the mean).
• Genting Singapore continues to be engaged in the ongoing request-for-concept process for the integrated resort in Yokohama, Japan. The request-for-proposal will be made in 2H20.

Source: RHB Invest Research - 15 May 2020