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Waiting its turn

  • 3Q21 revenue/adjusted EBITDA of S$251.5m/S$102.5m represented yoy declines of 16%/31% and qoq declines of 9%/31%.
  • 3Q business momentum was weak following introduction of enhanced safe management measures to curb the surge in Covid-19 cases in Singapore.
  • Singapore’s Vaccinated Travel Lanes (VTL) are an encouraging sign of reopening. Reiterate Add and TP of S$0.95, based on 9.5x FY22F EV/EBITDA.

Covid-19 resurgence hurt recovery

During the third quarter, Singapore reverted back to Phase 2 Heightened Alert (P2HA), where social gatherings were limited to two persons from a group of five. The move meant lower operating capacities for GENS across both its gaming and non-gaming segments. The stricter limit of two players per table during the quarter hurt gaming revenues, which fell 9% yoy and 14% qoq to S$194.7m. Comparably, non-gaming revenues were less affected by the lower operating capacities as tourists, who are key drivers for the segment’s performance, have been missing since 2Q20.

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Ready to usher in FY22F

Singapore ’s move to re-open international borders will see the gradual return of both business and leisure travel, especially given the introduction of Vaccinated Travel Lanes (VTLs), which allow for non-quarantine travel for vaccinated travelers from eligible countries. In the near term, GENS is likely to see muted impact from the VTL on its business as the current VTLs (Fig 1) do not include countries from GENS’s traditional source markets. However, Singapore ’s Covid-19 risk classification of various ASEAN countries (part of GENS’s key visitor demographics) has recently been revised downwards (Fig 2; lower being safer). This could mean potential inclusion into the VTL arrangement, which could lead to a meaningful recovery in footfall at GENS’s facilities.

Stepping up to support nation’s efforts to contain Covid-19 again

In September, GENS was appointed the Managing Agent of the Community Treatment Facility (CTF) at the NTUC Health Nursing Home in Tampines. This is follow ing the resurgence of Covid-19 cases in the country, which has placed the public healthcare system under pressure due to the shortage of manpower as well as hospital beds. The management of the CTF could supplement the weakness from GENS’ core gaming and attractions business in the near term but w e understand that these contracts usually have a short tenure.

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Patience to pay off; reiterate Add with TP of S$0.95

GENS remains a laggard but its pathway to recovery is becoming more visible as border re-opening is underway. We retain our Add call and TP of S$0.95, pegged to 9.5x FY22F EV/EBITDA (historical mean). Upside risks include lasting and significant contribution from management of CTFs while downside risks include deferred border re-opening for key visitor markets.