Maintain HOLD Call But Cut Target Price by 5% to SGD0.76

• Genting Singapore (SGX:G13)'s 2Q20 and 6M20 core net loss were within our expectations but the lack of interim DPS was below our expectations.
• Despite having reopened on 1 Jul 2020, Genting Singapore is uncertain on its outlook. We maintain our EPS estimates but cut our FY20E and FY21E DPS to 0cents/2cents from 4cents/4cents. Reverting back to 14.5% WACC (13.1% WACC previously) and cutting our ‘g’ to 0% from 1%, we cut our DCF-based Target Price to SGD0.76 from SGD0.80.
• With < 10% upside potential, we maintain our HOLD call.

Losses In-line But Nil Dividends a Negative Surprise

• Genting Singapore reported 2Q20 core net loss of SGD163.3m (-197% y-o-y). Ex-exceptional items (mostly impairments), 2Q20 core net loss of SGD116.5m (-170% y-o-y) brought 6M20 core net loss to SGD63.3m (-117% y-o-y) which was within our but below consensus expectations.
• Genting Singapore also stated that it will not declare an interim DPS (6M19: 1.5cents) which is below our expectations and will not comment if it will declare a final DPS this year despite its huge net cash balance (end-2Q20: SGD3.4b).

Near Term Outlook Still Uncertain Despite Reopening

• Although RWS recently dismissed most of its casual staff and aims to rationalise 20-30% of its fixed costs, it does not expect to breakeven in the near future due to lack of international gamblers and visitors and social distancing requirements.
• Furthermore, only local gamblers who are card members can gamble currently. As we alluded to earlier in report Genting Singapore - Maybank Kim Eng 2020-07-23: Resetting Our Post-reopening Expectations, Genting Singapore stated that international gamblers and visitors have to return en masse for RWS to breakeven and generate profits.

Maintain EPS Estimates; Cut FY20E and FY21E DPS

• We maintain our EPS estimates which assume only local gamblers for the rest of FY20E, local and Malaysian gamblers for FY21E and the usual suite of local, Malaysian, Chinese and Indonesian gamblers for FY22E as we expect the COVID-19 pandemic to gradually subside across RWS’ key markets.
• That said, we cut FY20E/FY21E DPS to 0cents/2cents from 4cents/4cents following the lack of an interim DPS this year but leave FY22E DPS at 4cents as we expect earnings to have recovered by then.

Source: Maybank Kim Eng Research - 7 Aug 2020