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Mon, November 16, 2020 – 13:09
Shares of integrated resort operator Genting Singapore, its Malaysian counterpart and its parent company rose on Monday, driven by a sharp quarter-on-quarter turn in results for the Singaporean company.
Genting Singapore rose as much as 9.1 percent to hit Singapore’s 82 cents around 11:52 a.m.
It was down slightly to 81.5 cents at noon, seven cents or 9.4 percent higher than the previous close. Around 61.8 million shares changed hands, making it the second most traded by value and third by volume on the Singapore exchange in the morning.
The last time the counter price listed on the motherboard reached such highs was in early June this year.
Its parent company, Malaysian-listed hospitality and entertainment giant Genting Berhad, rallied 8.7 percent or RM 0.33 to a four-month high of RM 4.12 as of 12:00 pm with 27.8 million shares traded.
Genting Malaysia Berhad, which operates Resorts World Genting, was up 4.9 percent, or RM 0.12, to RM 2.55 at 12.25 pm, with 32.2 million shares changing hands.
The Singapore unit’s third-quarter revenue and earnings beat market expectations, and local punters helped bring the company back to the black numbers.
Net income after taxes was S $ 54.4 million for the quarter through September, reversing the net loss of S $ 163.3 million from the previous quarter. However, in year-on-year terms, this still represented a decrease of 65.7 per cent from a net profit of S $ 158.9 million previously.
The sequential rebound came as Resorts World Sentosa (RWS) generated higher-than-expected gaming revenue of S $ 213 million in the latest quarter, RHB wrote in a note Monday.
Therefore, Q3 2020 net income forms a solid foundation for earnings going forward and provides brighter prospects, said RHB analyst Juliana Cai.
She improved the stock to “neutral” from “sell” and raised the target price to 72 cents from 62 cents previously.
The company’s business update on Saturday suggests it can generate annualized earnings before interest, taxes, depreciation and amortization (Ebitda) of S $ 500-600 million, even in the absence of tourism expenses and capacity limitations, Cai added.
“The positive operating cash flow generated, along with its existing net cash of S $ 3.6 billion as of June 30, 2020, gives confidence that the group has sufficient capital to fund its RWS expansion mega capex of 4,500 millions of Singaporean dollars over the next four to five years, “he said.
While third-quarter earnings surprises could be due to stifled local demand after a prolonged lockdown, the absence of such demand in the fourth quarter could be offset by school holidays and easing of capacity restrictions at attractions, according to RHB .
In view of the improving outlook, RHB also expects Genting Singapore to resume dividends later this year, with a probable dividend of two cents a share.
Cai said tourists are likely to return to half pre-Covid-19 levels by the fourth quarter of 2021 as borders are gradually reopened.
The stabilizing Covid-19 situation in Singapore and the flow of positive news about vaccines should also support the stock price in the near term, he added.
Maybank Kim Eng (MKE) maintained its “hold” call to Genting Singapore on Sunday with a slightly higher price target of 78 cents, from 76 cents previously.
The brokerage noted that Genting Singapore’s third-quarter results came as a surprise to the upside, likely due to local players staying in the city-state to gamble.
The central nine-month net profit would amount to around S $ 9.9 million, which beats MKE’s forecast, as the brokerage expected a net loss for the full year.
The outperformance was largely due to net revenue from the nine-month games falling 60 percent year-on-year, 14 percentage points less than MKE expected.
Based on the results of RWS rival Marina Bay Sands (MBS), MKE analyst Samuel Yin wrote that RWS’s high-margin gross gaming revenue (GGR) from slot machines probably didn’t fall much year-over-year either. as local players had to stay in Singapore, as they could not cross over to Malaysia to play.
Yin noted that for the first time in nearly a decade, RWS generated higher quarterly Ebitda than MBS.
It more than quadrupled its fiscal 2020 Ebitda estimate for Genting Singapore as it now forecasts the mass market GGR (tables and slots) to fall by a tighter 50 percent year on year.
In July, RWS began welcoming visitors to Universal Studios Singapore and SEA Aquarium, as the Republic entered Phase Two of its gradual reopening. However, in its business update on Saturday, Genting Singapore said that demand remained “weak” at the integrated complex.
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