Maintain HOLD Call With Lower Target Price of S$0.83 (-3%)

• Genting Singapore (SGX:G13)'s 1Q22 results were below our expectations. That said, we gather that it was due more to non-cash depreciation. More importantly, EBITDA was within our expectations.
• Going forward, Singapore’s reopened borders ought to translate into better future quarterly earnings. Thus, we maintain our earnings estimates for Genting Singapore. Yet, we are wary that long term earnings will be stifled by Thailand which is mulling integrated resorts.
• Trim DCF-based target price for Genting Singapore by 3% to S$0.83 from S$0.86.

Net Profit Below But EBITDA Within Our Expectations

• Genting Singapore's 1Q22 core net profit of S$43.5m (-2% y-o-y, +263% q-o-q) was below our/consensus expectations at 17%/13% of our/consensus FY estimate. Yet, 1Q22 EBITDA of S$124.8m (-3% y-o-y, +80% q-o-q) was within our expectations at 22% of our FY estimate.
• We gather that the earnings shortfall was due to higher-than-expected depreciation caused by accelerated depreciation of certain assets ahead of Genting Singapore’s S$4.5b ‘RWS 2.0’ reinvestment programme.

Future Quarters Ought to be Gradually Better

• At first glance, Genting Singapore's 1Q22 EBITDA of S$124.8m appears slightly below our expectations. That said, we gather that business will gradually improve after Singapore, Malaysia and Indonesia reopened their borders (Singapore & Malaysia: 1 Apr 2022, Indonesia: 22 Mar 2022) coupled with Singapore axing pre-and post-arrival testing on 26 Apr 2022.
• Barring a full blown global recession, we opine that future quarterly earnings of Genting Singapore ought to be gradually better than that of 1Q22. Thus, our earnings estimates are unchanged.

Trim Target Price by 3% to Reflect Risk From Thailand

• Yet, we are wary that long term earnings will be stifled by Thailand which is mulling legalising integrated resorts. A 60-member extraordinary committee examining the feasibility of opening Integrated Resorts in Thailand will submit its report (which is already prepared) to the House Of Representatives (HOR) very soon (HOR reconvenes on 22 May 2022). Thus, we raise our Beta to 1.4x from 1.3x and thus, raise our WACC to 11.6% from 11.0% and trim our DCF-based target price for Genting Singapore by S$0.03 to S$0.83.

Source: Maybank Research - 13 May 2022