Maybank Kim Eng analyst Yin Shao Yang has upgraded Genting Singapore to “buy” from “hold” with a higher target price of 95 cents from 78 cents previously.
The upgrade comes in anticipation of phase 3 of Singapore’s reopening on Dec 28 in addition to the arrival of the Pfizer-BioNTech vaccine.
Amid the easing measures, attractions, including integrated resorts, will be allowed to increase its operating capacity to 65% from 50%.
As it is, Genting’s earnings outperformance in 3QFY2020 was largely based on 25% of operating capacity.
Attractions were allowed to increase its operating capacity to 50% from 25% from Sept 18.
The casino at Resorts World Sentosa (RWS) also opened to all guests from Oct 9.
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As such, Yin believes Genting Singapore’s 4QFY2020 earnings ought to improve q-o-q.
The arrival of the Pfizer-BioNTech vaccine will also boost confidence amongst Singapore residents to visit RWS again.
In his address to the nation on Dec 14, Prime Minister Lee Hsien Loong also stated that Singapore will gradually reopen its borders, which means Chinese, Malaysians and Indonesians, which accounted for 80% and 50% of RWS’s pre-Covid-19 VIP/mass market gross gaming revenue (GGR).
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To this end, Yin says he is increasingly confident of his earnings estimates for Genting Singapore.
“Our FY2021E/FY2022E earnings estimates are unchanged as they are based on VIP and mass market GGR recovering to 50%/75% and 75%/100% of pre-Covid-19 levels,” he says.
“That said, we lower our weighted average cost of capital (WACC) from 14.5% to 11.8% as we revert to the five year mean beta of 1.2x (1.5x previously) as we are increasingly confident of our earnings estimates,” he adds.
As at 4.56pm, shares in Genting Singapore are trading 3.5 cents higher or 4.1% up at 89 cents.
