• We think Genting Singapore offers compelling value to longer-term investors - its CY21F EV/EBITDA is still below long-term mean, and it offers 5.1% dividend yield.
• We reiterate ADD, with a higher 12-month Target Price of S$0.84, now based on 8.5x CY21F EV/EBITDA (7x previously), close to -0.5 s.d. from long-term mean.
• Given the later-than-expected opening and return of tourists, we cut our FY20- 21F adjusted EBITDA forecasts.

Strong Balance Sheet to Finance Any Near-term Capex…

• Genting Singapore (SGX:G13)’s cash pile has steadily grown since 2015 to S$3.9bn at end-2019. Its debt load has also dwindled since redeeming its S$2.3bn perpetual securities in FY17 and its voluntary full prepayment S$680m (under its S$2.27bn syndicated senior secured credit) in Apr 2019.
• While Genting Singapore's FY20F cash intake should decline due to the volatile environment, we deem end-FY19 net cash position of S$3.7bn as sufficient for its nearest potential capex of S$900m to acquire land for its Resorts World Sentosa (RWS) 2.0 development. During its AGM on 28 May, Genting Singapore said that construction of RWS 2.0 may be delayed due to global supply chain disruptions and labour shortages.
• Any next large capex will be for any Japan Integrated Resorts (IR) investment, in our view. However, according to GGRAsia.com, the Japanese government is discussing with prefectural authorities for a possible change to the timetable for licensing such venues. In our view, this implies a delay. Genting Singapore mentioned during its AGM, that the Government of Japan had mentioned that it would work towards “IR Area Designation” in 1H21F, hence, in order to facilitate this timeline, targeted release for the IR Implementation Guidelines was by the summer of 2020.

…and Dividend Payments

• Genting Singapore has steadily lifted its dividends since FY15, to 4.0 Scts in FY19.
• Instead, DPS has slowly increased as Genting Singapore strengthened its net cash position. Hence, we believe that GENS should at least maintain DPS at 4 Scts in FY20F.

Universal Studios Singapore, Casino and SEA Aquarium Reopen in Early-Jul 20

• Genting Singapore reopened Universal Studios Singapore (USS) and the casino on 1 Jul 2020, followed by SEA Aquarium on 4 Jul 2020.
• Universal Studios Singapore and SEA Aquarium are now opened for only four days a week with staggered operating hours. All guests including Annual and Season Pass Holders, are required to make online reservations in advance and book their date of visit prior to visiting the park.
• Casino access is limited to existing Genting Rewards members and annual levy holders. Several safety procedures are listed to be in place:
  1. alternate electronic gaming machines are kept empty;
  2. perspex shields are installed at table games, slots and electronic table games;
  3. gaming table seats are spaced at least one metre apart;
  4. limited number of patrons at each gaming table -- maximum four players excluding roulette and Tai Sai tables which are capped at three players per table;
  5. bets are not accepted from standing patrons;
  6. gaming chips collected from customers are cleaned and sanitised; and
  7. playing cards are disposed after two hours.
• We visited Resorts World Sentosa over the weekend. We noted that patrons could only purchase tickets online and there were multiple safe distancing posters everywhere. While it was visibly emptier at the SEA Aquarium in the earlier part of the day, we were pleasantly encouraged that there was some crowd in Universal Studios Singapore. Due to the limited capacity, there was still 15-20 minutes waiting time for the opened rides. At some point, tickets were given for rides which had reached their maximum queue capacity. By late-afternoon (4-5pm) some popular rides, i.e. Cylon, Human and Revenge of The Mummy were sold out for the day to pass holders without express lane tickets.

At Least S$116m Worth of Relief/grants in FY20F

• We estimate Genting Singapore could receive S$88.7m of Job Support Scheme wage grants (JSS) in CY20F, assuming three months of 75% wage support and seven months of 25% wage support on a salary base of S$3,400 and estimated 6,600 qualifying staff strength (we assume 70% of its staff are local).
• We also estimate Genting Singapore is entitled to Property Tax Rebate of S$20m (IRs to receive 60% Property Tax Rebate) and Foreign Levy Rebate (S$750m for each work permit/S Pass holder) worth S$7.3m in FY20F.

Forecast Revisions

• In our May report Genting Singapore - CGS-CIMB Research 2020-05-13: Weak 1Q20, But Maintain Longer-Term View, we had initially assumed Resorts World Sentosa could reopen by Jun, but with the reopening now only occurring in Jul and at a capped capacity, we forecast FY20F gaming revenues to fall 61% (vs. 50.9% previously), and FY20F non-gaming revenue to decline 51% (vs. 39% previously).
• We also include S$116m worth of government grants we think Genting Singapore could receive in FY20F. Our changes result in FY20F adjusted EBITDA falling 27.6% to S$350.5m (-c.70.5% y-o-y).
• In its AGM, Genting Singapore mentioned that it envisages travel and tourism spending potentially returning to pre-Covid-19 crisis levels only towards the later part of FY21 or early-FY22. Hence, we forecast FY21F gaming revenues at 67% of FY19’s gaming revenues, and FY21F’s non-gaming revenues at 76.8% of FY19’s non-gaming revenues. This lowers our FY21F adjusted EBITDA by 2.2%.
• We have left our FY22F adjusted EBITDA relatively unchanged, as we have already conservatively assumed that it is at 86.1% of FY19’s adjusted EBITDA.

Reiterate ADD for Genting Singapore With Higher Target Price

• We had earlier pegged Genting Singapore’s valuation to 1 s.d. below its 2011-2019 mean to take into consideration valuations Genting Singapore’s last downturn and as we were unsure how long the lockdown would last. However, with the business gradually easing back out of the lockdown, we lift our valuation basis to 8.5x CY21F EV/EBITDA (from 7x previously), close to -0.5 s.d. levels from its long-term average.
• We think valuation closer to the -0.5 s.d. level is fair, given the medium-term uncertainties with regards to return of international travel which may only occur by end of FY20F for leisure travellers.

Source: CGS-CIMB Research - 6 Jul 2020