Citi Research analysts George Choi and Ryan Cheung have kept a “buy” rating on Genting Singapore with an unchanged target price of $1.01.
Genting Berhad most certainly is just beginning to enjoy the benefits from the lifting of travel restrictions.
As Genting Singapore is an important earnings contributor to the group, Choi and Cheung are not surprised by Genting Berhad's decision to ignore an unsolicited offer for its stake in Genting Singapore.
“Although Genting Berhad does have approximately RM40 billion ($12.6 billion) of interest-bearing debt at end-2021, only around RM5 billion is due by end-2023, which means Genting Berhad does not have much debt repayment obligations in the near term,” explain the analysts.
Next, though Choi and Cheung observe that the group’s gearing is high, they argue that it should be coming down gradually from this peak level, thanks to the relaxation of Covid-19 restrictions in Singapore and Malaysia. “This in turn should fuel the ramp-up of Genting SkyWorlds at Resorts World Genting and the business recovery at Resorts World Sentosa,” say the analysts.
At the same time, Genting Singapore was the single largest Ebitda contributor to Genting Berhad in 1QFY2022– approximately 31% of Genting Berhad’s adjusted Ebitda.
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On top of that, Article 42 of the Casino Control Act states that prior written approval from the government would be required for a transfer of interest if, after the transaction, the remaining stake held by the main stakeholder of a casino operator falls below 20% of total voting shares, or the acquirer holds equal to or more than 20% of total voting shares.
Genting Berhad is the holding company of Genting Group.
“We value the Singapore casino at 10x FY2023 EV/Ebitda, roughly par to Macau Peninsula given the similar growth profile,” say Choi and Cheung. “We value the new phase at a higher 12x target multiple (discounted back to 8x) as we expect the new phase to accelerate visitation, gross gaming revenue (GGR) and Ebitda growth when it opens.”
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The analysts also value the theme park at the same approximate 10x EV/Ebitda multiple.
As at 10.13am, shares in Genting Singapore are trading at 4 cents down or 4.97% lower at 76 cents.
Photo: Bloomberg
