UOB Kay Hian Research analysts Vincent Khoo and Jack Goh are maintaining “overweight” on the gaming sector in Singapore, with Marina Bay Sands (MBS) delivering a lacklustre quarter yet again and Resorts World Sentosa (RWS) expecting a “similarly dull” outlook.
“While we remain confident that Singapore’s casinos are poised for a better recovery in 2H2021, near-term sentiment in the sector will be impacted by the Covid-19 outbreak identified at MBS in July,” write Khoo and Goh.
In a July 22 note, Khoo and Goh are maintaining “buy” on Genting Singapore, which owns RWS, with a target price of $1.08.
“The stock’s 15% retracement from this year’s peak provides a good buying opportunity and we expect the market to look beyond the temporary earnings weakness and towards an improving momentum in the regional Covid-19 vaccination exercise in 2H2021 which will eventually lead to borders reopening. Our valuation also assumes Genting Singapore’s Japan integrated resort (IR) bid would not materialise,” write Khoo and Goh.
See: Upcoming mayor election poses risk to Genting Singapore’s bid for Yokohama integrated resort: RHB
For MBS, 2QFY2021 gross gaming revenue (GGR) softened q-o-q from a seasonally strong 1QFY2021 and amid a tightened circuit breaker. Las Vegas Sands’ (LVS) 2QFY2021 results revealed that MAS’ adjusted EBITDA eased 22.2% q-o-q to US$112 million.
That said, Khoo and Goh note that the y-o-y comparison is not meaningful as MBS operated for only one week in 2QFY2020 due to the country’s circuit breaker.
On a q-o-q basis, MBS’ 2QFY2021 net gaming revenue declined 26% q-o-q to about 50% of pre-pandemic levels. On a constant currency basis (in Singapore dollars), 2QFY2021’s mass market (table and slot) GGR rose 1,610% y-o-y but shrank 22% q-o-q.
VIP GGR fell 53% q-o-q in 2Q21, amid Singapore’s border closure and travel impediments that largely reduced international tourist patronage.
RWS is expecting a similarly dull 2QFY2021, write Khoo and Goh. Like MBS, the local-dependent RWS is expected to deliver a q-o-q weaker GGR in 2QFY2021. 1QFY2021 GGR was at 55% of pre-pandemic levels.
The sector, like many others, faces a temporary setback as Covid-19 cases flare up in Singapore, with Phase Two (Heightened Alert) in place until Aug 18.
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MBS is closed from July 22 to Aug 5 after a Covid-19 cluster was detected there. “Consequently, we are reviewing our forecasts for the sector to reflect stricter social distancing measures (cutting operating capacity to 50%), and a 21-day quarantine for inbound travellers,” write Khoo and Goh.
“Nevertheless, we remain confident that Singapore would emerge swiftly from Phase Two given its disciplined approach (as seen last year), and with wide dispensation of vaccines. The government is expecting 5.7 million citizens to be vaccinated by 3Q2021. This will allow both MBS and RWS to swiftly achieve 70% of pre-pandemic EBITDA,” they add.
As at 1.54pm, shares in Genting Singapore are trading 0.5 cents higher, or 0.63% up, at 80.5 cents.
Photo: Genting Singapore
