Maybank KimEng: Genting Singapore’s ‘crisis valuations’ are ‘unjustified’

Singapore one dollar bill

Genting Singapore’s share price tumble is “unjustified as it implies ‘crisis’ valuations,” Maybank KimEng said in a note this week.

Genting Singapore’s fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) had fallen 20 percent to S$255.1 million from the previous quarter, due to a lower-than-average VIP win rate, staff bonuses, events and inventory write-offs, the note said. This had sent shares of the hospitality and casino operator plunging; at their lowest in April, the stock was down nearly 26 percent from its January peak and they remain down around 16 percent from that peak.

But the brokerage said that GENS’ fourth-quarter fundamentals were “actually not bad” and that “conversations with industry participants reveal that the Macau VIP market recovery has and will spill over to the Singaporean one,” said the brokerage. Moreover, “regarding the higher margin mass market, we expect it to continue recovering in tandem with consumer sentiment in Singapore.”

It added that the recovery on the ringgit and new premium mass-market offering may help to boost Resorts World Sentosa’s mass-market gross gaming revenue market share more than expected.

GENS’ earnings quality is a lot better today, compared with the last time it traded at similar valuations, when its earnings had been hampered by derivative losses, foreign-exchange losses and impairments of trade receivables, the note said. As such, the casino operator should trade at least at its mean valuations, or 12 times enterprise value (EV)/EBITDA, compared with the stock’s current 9 times, the analyst added.

Maybank KimEng kept its Buy rating on Genting with a target price of S$1.46 per share.

On Thursday at 10:04 A.M. SGT, the stock was up 2.65 percent at S$1.16.