Hopeful of better recovery in FY23F
? FY21 revenue and adj. EBITDA came in below expectations at 84%/90% and 74%/83% of our/consensus estimates.
? We reduce FY22F adj. EBITDA by 12% on expectation of a slower opening of international borders, especially with key source markets.
? Reiterate Add with a slightly higher TP of S$0.96 as we roll forward our valuation and peg to 9x FY23F EV/EBITDA on better recovery prospects.
Weaker gaming revenue in 4Q21 weighed on business momentum
Gaming revenue of S$164.9m during 4Q21 was 23% lower yoy, the lowest level since 2Q20 w hen Singapore entered domestic lockdowns, i.e. Circuit Breaker (CB) period. We believe the lower gaming revenue was likely due to pent-up demand for travel locally when Singapore opened up Vaccinated Travel Lanes (VTLs) during the quarter, which led to a net outflow of gamers during the period as the VTLs in place did not include typical source markets for gamers, such as China and other SEA markets. How ever, non-gaming revenue of S$91m during the quarter was the highest level since 1Q20, partially offsetting weakness arising from the gaming segment.
Recovery in sight but at gradual pace
Despite low er gaming revenue in 4Q21, the management has expressed optimism moving ahead as operations at various Resorts World Sentosa (RWS) attractions were noted to have picked up in activity, although still restrained by the 50% capacity limits. How ever, the latest government guidance on reopening plans gives hope of a quicker recovery as capacity limits could be relaxed for mask-on activities, which could help boost capacity in both GENS’s gaming and non-gaming facilities. Nevertheless, w e adjust our FY22F adj. EBITDA dow nw ards by 12% to reflect a more gradual reopening pace, as travel from North Asia, one of the key source markets for RWS’s tourists, seems unlikely in the near term. We increase FY23F adj. EBITDA by 4% as w e are hopeful of a swifter recovery of international travel by FY23F.
Resilient financials could pave way for higher dividends ahead
GENS ended FY21 with a healthy cash position of S$3.3bn despite capex of S$942m that led to a net cash outflow of S$671m for the year. We think that GENS’s cash position will remain supportive of higher dividends given the management’s guidance of S$400m in capex for FY22F allocated to the development of RWS 2.0. We have forecast 2.5 cents dividend in FY22F, representing a dividend yield of c.3%.
Reiterate Add with TP of S$0.96
We roll forward our valuations to FY23F adj. EBITDA at a slightly low er multiple of 9x compared to 9.5x previously as w e remain cautious given lingering uncertainty on the pace of reopening as well as a lack of catalysts for a new operating market in Yokohama compared to the past 3 years. The stock in currently trading at 8x EV/EBITDA, 1 s.d. below its historical 6-year mean of 9.5x.