Genting Singapore not spared from Covid-19 slack
Genting Bhd’s (Genting) 52.7 per cent-owned subsidiary, Genting Singapore, reported a 26 per cent year on year (y-o-y) decline in its first quarter of financial year 2021 (1QFY21) net profit to S$34.5 million, as the impact of the Covid19 pandemic continued to weigh on operational performance.
Although the results came in below Public Investment Bank Bhd’s (PublicInvest Research) full-year estimates, it maintained Genting Singapore’s earnings forecast on the expectations that the global rollout of vaccination programmes would lead to a gradual recovery of economic activities.
“Nevertheless, the pace of recovery could be dampened by the recent resurgence of virus cases in several of its key markets,” it underscored. “Despite the risk of a slowerthan-expected recovery, we continue to believe that the worst is over for the group.”
Operational performance of the tourism industry continued to be affected by the impact of Covid-19 pandemic, as Genting Singapore’s non-gaming revenue posted a larger decline of 56 per cent y-o-y compared to a 19 per cent drop in gaming revenue.
“We attribute this to low occupancy and utilisation rates of its hotels and theme park operations given the lack of international visitors to Singapore,” it said. “Net profit saw a smaller decrease due to various support measures initiated by the Singapore Government.
“Resorts World Sentosa has been developing new events and promotions to attract domestic tourists. However, we believe international borders are likely to remain restricted in the near term until we are closer to achieving herd immunity, perhaps in early 2022.
“This suggests that the operations of its leisure and hospitality segment should continue to run below optimal rate in FY21F. Nevertheless, given the rollout of vaccination programmes globally, we are of the view that a complete lockdown of the global economies is unlikely to recur in the future.”
Meanwhile, revisions to Genting Singapore’s S$4.5 billion mega expansion plan are ongoing and these include health and safety protocols to provide reassurance to its visitors. The US$4.3 billion Genting Las Vegas is scheduled for opening on June 24, 2021.
“We generally believe the new integrated resort will remain in net loss in the initial years of operations given the badly affected tourism and hospitality sector, following the onslaught of a global pandemic.
“Post-Covid-19 era is likely to see a slow build-up and coupled with a potential increase in depreciation charges, we do not expect Genting Las Vegas to contribute positively to the group’s bottomline over the next two to three years.”
As for Kenanga Investment Bank Bhd (Kenanga Research), it believed the gambler will face “a dicey near-term outlook before it gets better”.
“In the last quarter’s conference call, management voiced its caution given the limited local market size to grow the business due to cross border restrictions. With fear of a fourth wave infections, near-term outlook remains dicey,” it cited in its own research.
“However, being one of the best managed countries under current pandemic period, Singapore is likely to be the first few to open its border. We expect a better second half and recovery to prepandemic level only in 2022.”
Back in Malaysia, with the second movement control order (MCO 2.0) in 1QFY21 and the start of MCO 3.0 in Klang Valley this month, Genting Malaysia’s immediate earnings prospects are challenging.
“Thus, Genting Singapore is expected to lead Genting’s nearterm earnings.”