SINGAPORE (Mar 27): Analysts are more upbeat on Genting Singapore (GENS) as the group managed to receive a major lifeline in the form of property tax and wage setoffs by the government. The Singapore government yesterday announced a $48 billion Resilience Budget to help companies and individuals tide through the negative effects of the Covid-19 outbreak.
With this, Maybank Kim Eng and CGS-CIMB is keeping “buy” calls on GENS, with target prices of 84 cents and 76 cents, respectively.
Two measures from the Resilient Budget will impact GENS’ Resort World Sentosa (RWS): property tax rebate for integrated resorts will be raised to 60% from 10%; and the government pay companies 25% (general) or 75% (tourism) of monthly wages for every local worker capped at SGD4.6k each for 9 months till end-2020.
In FY18, GENS paid salaries of some $456.7 million to about 13,000 employees. This translates into average salary per employee of about $2,900 per month. That said, ‘Integrated Resort’ does not appear to be categorized under 'tourism' in the relevant annexure of the Resilience Budget.
In a Thursday report, Maybank analyst Yin Shao Yang says, “Thus, GENS may receive 75% wage set off for its hotels and theme park workers but just 25% for its casino workers. We understand that locals account for about 70% of GENS’ some 13,000 employees (legal minimum: 65%).”
CGS-CIMB analyst Lim Siew Khee on the other hand, reckons that the group could save up to $171 million in FY20.
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“We estimate the JSS could result in cost savings of $50-150 million (about 4- 12.3% of FY20 admin costs) assuming 60% of GENS workers are eligible locals, FY20 staff costs are some $450 million and applying the wage grant brackets of 25-75%. Should both these measures kick in, FY20 EBITDA could be lifted by about 10-26% and FY20 net profit by around 22-54%,” says Lim.
Meanwhile, Lim awaits further reconfirmation of such cost savings from management but is positive that the measures could cushion the impact from the significant reduction in tourist flows.
As at 11.50pm, shares in GENS are trading at 7.32% higher at 66 cents or 0.9 times FY20 book with a dividend yield of 6.5%, according to Maybank’s estimates.
