Nomura Research has lowered its EBITDA forecast by 15% for Genting Singapore in both 2021 and 2022 following weaker than hoped 1Q21 results and recent COVID-19 setbacks.
The revised estimates come after Genting Singapore, operator of Resorts World Sentosa, released its Q1 earnings results earlier this month, revealing a 12% decline in revenue to SG$277.9 million and 74% fall in profit to SG$34.5 million when compared with the December 2020 quarter.
In response, Nomura analysts Tushar Mohata and Alpa Aggarwal have cut their EBITDA estimates by 15% for FY21 to SG$530 million and for FY22 to SG$687 million. Likewise, net profit estimates have been cut by 26% for FY21 to SG$217 million and by 22% for FY22 to SG$335 million.
Mohata Aggarwal said the revisions “build in seasonal weakness, tapering government support for wage subsidy, recent return to a ‘stricter’ phase 2 of COVID-19 containment measures, as well as setbacks in managing COVID-19 across several Asian countries recently (e.g. Malaysia), which dim the prospect of a significant inbound tourism recovery for Singapore in 2021.”
However, the analysts believe there remains long-term upside to Genting Singapore even without factoring in the company’s increasingly strong chances of winning its IR bid in Yokohama, Japan. Galaxy Entertainment Group recently withdrew from Yokohama while Sega Sammy Holdings revealed it is looking to become only a minority investor, leaving Genting Singapore up against Melco Resorts & Entertainment and local firm Shotoku.
“Yokohama’s selection of preferred proposal and the upcoming mayoral elections are going to determine whether Genting Singapore ultimately wins a license for a Yokohama casino, they wrote, adding, “At this stage we do not build in any additional value from a Japan bid for Genting Singapore.”
Despite this, “We believe Genting Singapore will be one of the better tourism recovery stories due to its balance sheet strength and the relatively better control of COVID-19 in Singapore, along with fast pace of vaccination.”
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