“Genting Singapore should see a better year ahead as we expect the easing of movement restrictions, in comparison with the strict measures seen back in 2020-2021, to lead to more visitors to its premises,” the team writes in a Dec 23 research note.
RHB’s upbeat take comes even after the Singapore government announced the suspension of Vaccinated Travel Lane (VTL) ticket sales until Jan 20, amidst the threat of the Omicron variant.
See: Singapore freezes new ticket sales for VTL flights and buses into Singapore from Dec 23 to Jan 20
The way the team sees it, the suspension is a temporary setback. “Once the suspension is lifted, the VTL should see the gradual return of foreign visitors,” the team opines. Genting Singapore is expected to benefit as the VTL scheme is extended to more countries, beyond the current list of around 24 nations.
See also: UOBKH raises TP on SIA to $6.22, FY2026 earnings to see lift on fuel cost savings
The team also notes that while the Omicron variant may affect earnings recovery, the impact may not be as severe as before. “Many countries are now more experienced and nimble in handling the pandemic,” they remark.
This includes Singapore, which has put in place contingency plans to ramp up its healthcare capacity and is rolling out administration of booster shots. “Moreover, vaccine manufacturers are able to tweak the vaccines in a short amount of time to be variant-specific,” the team adds.
To that extent, the RHB team views that a full lockdown is unlikely.
For Genting Singapore, RHB highlights that the group continued to generate “healthy” positive operating cash flow, with $194 million postive cash flow reported for 1HFY2021 ended June.
As the variant and pandemic stabilises, RHB expects Genting Singapore to log a strong earnings recovery, along with renewed investor interest. “As seen in Oct 2021 after the Covid-19 situation stabilised, Genting Singapore’s share price recovered by c.18% in less than two months,” the team points out.
RHB says it continues to like the counter as a direct proxy to an eventual tourism recovery play.
The team also notes that current valuations are attractive, with the stock trading at an FY2022 EV/EBITDA ratio of 6.2 times, which is one standard deviation below the historical mean.In addition, RHB notes Genting Singapore is trading at a “significant” discount to the peers, which currently average at around 11 times.
“Its dividend yield of 4% is also decent, backed by a strong net cash position of SG$2.9 billion (c.32% of market cap),” the team adds.
As at 4.45pm, Genting Singapore shares are trading up 1 cent or or 1.32% higher at 76.5 cents.
