Time to step up its game

■ 1Q22 adj. EBITDA of S$124.8m came in below expectations at 15.8%/18.0%
of our/consensus FY22 estimates on higher utilities cost and slower recovery.
■ Expectations of subsequent recovery dampened as strict Covid-19
restrictions from key source markets are unlikely to be lifted soon.
■ Reiterate Add with lower TP of S$0.92; cut FY22F/23F/24F adj. EBITDA by
18%/4%/2% on deferred recovery in FY22F and inflationary pressures.

Slow start to FY22F exacerbated by cost pressures

Revenue of S$314.5m in 1Q22 was characterised by a recovery of both gaming and nongaming revenues (+13.2% yoy/+25.8% yoy). Gaming revenues reached S$234.5m during
the quarter, its highest level since 2Q20 w hen Covid-19 first appeared in Singapore. Non-gaming revenue was weaker qoq as GENS w as operating its attractions on a rostered
schedule due to prevailing capacity restrictions. Although revenues w ere only at
18.9%/19.9% of our/consensus FY22F estimates, we already projected a stronger
recovery in business momentum only in 2H22, with the assumption that travel with North
Asia will resume. Adj. EBITDA, how ever, fell short of expectations to come in at only
15.8%/18.0% of our/consensus FY22F estimates, declining 2.5% yoy despite the revenue
growth due to the expiry of the Job Support Scheme (JSS) and an increase in utilities
expenses. While w e believe revenues w ill continue to see improvement on a qoq basis,
the sharp increase in utilities expense is likely to outpace business recovery.

Increase in capacity but still missing tourists

The Singapore government has lifted most of the restrictive Covid-19 measures, increasing
capacity from 50% previously at its attractions. This will support the gradual recovery of
visits to its attractions. However, we think that relaxation of rules may not be as impactful
as tourists from key source markets in North Asia like China and Japan are still missing
due to strict domestic Covid-19 protocols in their home countries. With Singapore moving
ahead of regional countries to open international borders, we observe that there is more
outbound than inbound travel, which could lead to a net negative impact for GENS and its
attractions in the near term. GENS has also indicated that its pace of recovery could be
moderated as a result of limited flight schedules, higher airfares and ongoing travel
restrictions on visitors from certain countries.

Reiterate Add; slight hiccups along road to recovery

We cut our FY22-24F EPS by 4-31% as w e push back the expected return of tourists in
FY22F and factor in higher utilities expenses in FY22F-24F. We also lower our TP to
S$0.92, pegged at 9x FY23F EV/EBITDA, 0.5 s.d. below its 5-year historical mean. Rerating catalysts include: return of unrestricted travel with North Asia. Downside risks
include: extended lockdowns in North Asia and higher-than-expected outbound travel that
could lead to fewer visits to its facilities by locals.