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  • Upgrade to NEUTRAL from Take Profit with new Target Price of SGD0.73, from SGD0.64, 5% downside.
  • Resorts World Sentosa (RWS) reopens today with a capacity limit and safe distancing measures in place. As activities in Singapore gradually resume in Phase 2, we roll over our valuation year to FY21F to reflect some of the recovery expected.
  • A resurgence of COVID-19 cases and slower resumption of tourism remain downside risks to our recommendation.

Reopening of Resorts World Sentosa (RWS)

  • Genting Singapore (SGX:G13) is reopening its attractions at RWS today including the casino, Universal Studios Singapore theme park and S.E.A. Aquarium. At the moment, attractions would be restricted to 25% of their respective operating capacities, according to the Singapore Tourism Board.
  • The casino would be limited only to current Genting Rewards Members and Annual Levy Holders while the theme park and aquarium require online advanced reservation for all guests and annual/season passholders. As a result, we do not expect a significant upsurge in sales this year. But the reopening of its attractions marks a positive first step to the group in resuming operations.

Tourism Could Take a Longer Time to Recover to Pre-COVID Days

  • Singapore is in the midst of reopening its borders, albeit, at a gradual pace. So far, the city has set up a “fast lane” agreement with certain provinces in China for officials and business travellers on essential trips. It is also working with Malaysia to set up cross-border travel. But mass leisure travel is likely to take longer to resume given Singapore has just begun Phase 2 of the reopening on 19 Jun.
  • In addition, the resumption of tourism depends not just on the number of COVID-19 cases in Singapore but also how well the pandemic is contained in other countries.

Changes in Forecasts

  • We had previously expected a strong recovery in tourism in FY21F on the assumption of the pandemic coming under control and the unleashing of pent-up demand. However, we note that some countries are experiencing a second wave of COVID-19 cases after economic activities resumed while others are still battling the first wave. Thus, there could be a long road ahead for tourism recovery as consumers might be cautious.
  • A slowdown in global economy could also hamper consumer spending. We now expect FY21F revenue to be 90% of pre-COVID days. We also cut our FY21F-22F EBITDA and PATMI by 11% pa and 14% pa.

Upgrade to NEUTRAL

  • At current Genting Singapore share price, we believe the market has already priced in some of the recovery in FY21F and we revise our call to NEUTRAL.
  • Faster-than-expected resumption of tourism activities and positive news flow on vaccine development would be upside catalysts to share price.
  • On the other hand, prolonged restrictions on capacity and tourism activities could lead to lowering dividends to preserve cash.
Source: RHB Invest Research - 1 Jul 2020

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