RHB Group Research remains upbeat on Genting Singapore despite the likelihood of its bid for the Yokohama integrated resort (IR) project being shelved following the election of anti-IR candidate Takeharu Yamanaka as Yokohama mayor.
"As things stand, it looks unlikely that Genting Singapore will be able to participate in this bid," the Singapore research team says in a Sept 3 research note.
Nonetheless, the team has kept its “buy” call with an unchanged target price of 92 cents, noting that no changes were made to their forecasts as they had not imputed any potential Yokohama IR win.
Instead, the team’s optimism is underpinned by the gradual border reopening for Singapore on the back of increased global vaccination rates.
The way the team sees it, the start of quarantine-free travel marks a positive sign for Singapore’s tourism industry. Travellers from Hong Kong, Macao, Mainland China, and Taiwan, together with inoculated travellers from Brunei and Germany, who test negative for Covid-19, are now able to enter Singapore without going through quarantine.
“While we do not expect a full recovery of foreign visitors to Resorts World Sentosa (RWS) in FY2021, the gradual reopening of borders and quarantine-free travel signify that the worst is over for the tourism industry.” the team says.
The team also positively views the relaxation of the capacity limit for non-gaming facilities at RWS, which has now been increased to 50% since Aug 19 from 25% previously during the Phase 2 (Heightened Alert) period.
“For the gaming facilities, it was reported that standing bets for table games are now permitted at Singapore’s two casino complexes with the maximum number of people per table increased to five (both seated and standing guests, including dealers) compared to two patrons previously,” the team comments.
To that end, the team sees Genting Singapore as the main beneficiary of the gradual reopening of economies and borders as more countries reach higher vaccination rates. “Genting Singapore should benefit greatly from the return of foreign visitors to its premises, which historically account for circa 80% of total visitorship,” the team says.
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They note that the current valuation for Genting Singapore at 6.5 times FY2022 EV/EBITDA is attractive compared to its regional peer average of around 11 times, presenting an opportunity to position for the FY2022 earnings growth recovery.
“Further upside to our FY2021-2022 could happen if the return of foreign visitors is faster than expected as more borders re-open,” they add.
As at 3.51pm, shares in Genting Singapore are trading up 0.5 cents or 0.64% higher at 78.5 cents.
Photo: Genting Singapore
