SINGAPORE (Feb 18): Genting Singapore (GENS) did not take part in the bidding of the Osaka integrated resort (IR).
Last Friday, the Osaka prefectural government announced that among the three shortlisted candidates (Genting Singapore, MGM and Galaxy) to submit the request-for-proposal (RFP) for the integrated resort concession bid, MGM and local partner Orix joint venture was the sole applicant.
According to Casino.org, MGM was the only operator making promises to hit a 2025 grand opening, an important date for Osaka to host the World Expo.
With Osaka now out of the way, GENS will focus to compete in Yokohama’s IR concession bid. Thus far, the group has not yet shared plans of its bid (Yokohama is expected to announce the winning bidder by 2H20) but competition will also be stiff among Las Vegas Sands, Melco and Wynn.
Nonetheless, UOB Kay Hian is keeping its “buy” call on GENS with a target price of 95 cents.
In a Monday report, lead analyst Vincent Khoo says, “We expect GENS to consider significantly improving its capital management should it fail to clinch the costly Japan IR concession bid (GENS had made a capex commitment of up to US$10 billion for this project).”
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Currently, the group has a net cash of $3.95 billion, which would mostly be “unencumbered” as the present operations can mostly fund the expansion of Resort World Sentosa or RWS 2.0, which is expected to be completed in 2025.
The analyst also believes that the RWS 2.0 will enhance the group’s earnings in the coming years.
On the other hand, RHB Group Research is maintaining its “neutral” recommendation on GENS with a target price of 85 cents.
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In a Monday report, analyst Juliana Cai says, “We believe MGM was the stronger contender in the race for the Osaka IR, as it managed to secure a major local consortium partner – ORIX. GENS is currently exploring the possibility of tying up with a local partner. During the last analyst’s briefing, management said it hoped to announce – by Sep-Oct 2020 – the securing of a consortium. We believe the ability to secure a strong partnership should improve GENS’ odds of winning a Japan IR bid.”
The group’s management has said that it was interested in bidding for the IRs of large metropolitan cities. Although Osaka and Yokohama are big cities in Japan, management said that Tokyo has recently sought request-for-information. Tokyo could be a location GENS would be interested in should the city become keen in pursuing a casino resort.
Overall, Cai says, “We expect some decline in share price amidst the disappointment from losing the Osaka IR race, as well as earnings pressure from the CoVid-19 outbreak.”
As at 11.05am, shares in GENS are trading at 88 cents or 1.3 times FY20 book with a dividend yield of 4.5%, according to RHB’s estimates.
