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CGS-CIMB remains optimistic on Genting Singapore despite 'unfavourable outcome' in Yokohama election

Felicia Tan
Felicia Tan • 2 min read
CGS-CIMB remains optimistic on Genting Singapore despite 'unfavourable outcome' in Yokohama election
The potential return of leisure travel in FY2022 may be beneficial to the counter, says CGS-CIMB.
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CGS-CIMB Research analyst Tay Wee Kuang has kept “add” on Genting Singapore with the same target price of 95 cents as its plans to build an integrated resort (IR) in Yokohama, Japan, fall through.

The current target price is pegged at 9.5 times of FY2022 EV/EBITDA.

See also: Anti-IR candidate to be new Yokohama mayor; Maybank Kim Eng downgrades Genting Singapore

Following his win in the Yokohama mayoral elections, Dr. Takeharu Yamanaka, who campaigned on an anti-IR platform, announced that the city will not be making a hosting bid as one of Japan’s IR destinations.

This, says Tay in an Aug 23 report, could prompt “unfavourable share price movement” due to a lack of catalysts in the near-term.

Currently, Genting Singapore is banking on the reopening of international borders for its recovery. In the 1HFY2021, the group reported adjusted EBITDA of $276 million, with the lack of tourists hurting non-gaming revenue.

"Travel arrangements with China and the Asean countries, whose travellers combined account for up to 80% of Genting Singapore's visitor demography, will be key to its recovery," he writes.

That said, Tay has kept his estimates unchanged as the potential earnings accretion from the Yokohama IR project was not factored into his current target price.

Genting Singapore is also relying on RWS 2.0 – where it has committed to a $4.5 billion project with the Singapore government in exchange for extending the exclusivity period on its casino license to end-2030 – to drive longer-term growth.

To this end, Tay says he remains optimistic that leisure travel may return in the FY2022, according to the initial border reopening plans laid out by the government.

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“[The plans], which include dedicated vaccinated travel lanes, that could be increasingly beneficial to Genting SIngapore as vaccination rates in regional neighbours improve,” he writes.

Shares in Genting Singapore closed 1 cent lower or 1.26% down at 78.5 cents, or a FY2021 P/B of 1.22 times and dividend yield of 1.24%.

Photo: Genting Singapore

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