Ahead of Genting Singapore G13 ’s (GENS) full-year results on Feb 22, Citi analysts George Choi and Ryan Cheung are maintaining their “buy” call, as they see Resorts World Sentosa (RWS) as one of the biggest beneficiaries from Singapore’s reopening.
Their target price remains unchanged at $1.20.
Choi and Cheung make their forecasts according to rival Marina Bay Sands’ (MBS) “decent” ebitda growth in 4QFY2024, which saw its net revenue increase by 5% q-o-q to US$1.06 billion ($1.42 billion), mainly driven by the strong growth in gaming segment.
The analysts note that the VIP gross gaming revenue (GGR) grew 5% q-o-q, mainly driven by the higher VIP hold of 4.57% (vs. 3.85% in 3QFY2023) but partially offset by the 11% q-o-q decline in volumes. Mass volume exceeded the 4QFY2019 levels by about 53%, while slot volumes exceeded 4QFY2019’s by about 80%. Meanwhile, total mass GGR grew 3% q-o-q, and exceeded 4QFY2019 level by 34%.
“These numbers were achieved despite the still-subdued visitation from China (airlift capacity recovery of only about 81% in 4Q2023 compared to 2019 level),” they note.
MBS’ property ebitda improved 11% q-o-q to a quarterly record high of US$544 million, and its luck-adjusted ebitda of US$473 million beat Citi’s forecast of US$432 million by 9%.
The analysts note that luck-adjusted ebitda margin came in at 48.8%, higher than their forecast of 46%. Although hotel room rates fell about 5% q-o-q to US$647, it was about 44% higher than 4QFY2019, while occupancy fell about 2 percentage points to 94.4%. They note that MBS introduced about 1,250 redesigned rooms as of end-2023 including about 350 suites.
On that note, Choi and Cheung report their takeaways from the Las Vegas Sands’ earnings call, in which management has highlighted that MBS has been attracting higher-value tourists.
“The record high ebitda in 4QFY2023 was achieved when part of the MBS rooms were under renovation. Management currently looks at MBS as a US$2 billion asset today (in terms of annualized ebitda),” they note.
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They add that management targets the additional aout 550 redesigned rooms at MBS to be in service by Chinese New Year 2025, while other enhancements to non-gaming amenities to be completed in phases through 2024 to 2025.
With about 770 suites in total after the completion of the refurbishment program, management expects MBS to achieve annualized ebitda of more than US$2 billion going forward and then grow 10-20% over the next three or four years, to generate US$3 billion projected ebitda by end of decade, they say.
For the 4QFY2023, Choi and Cheung are forecasting on revenue to reach $697 million on a luck-adjusted basis, exceeding 4QFY2019 levels by 15%.
They forecast that ebitda will exceed 4QFY2019 by 11% to reach $319 million, and note that their conservative 4QFY2023 ebitda forecast represents a about 2% q-o-q decline as compared to a luck-adjusted 3QFY2023 ebitda.
Meanwhile, they add that a likely increase in dividends, from 3 cents per share in FY2022 to 4 cents per share in FY2023 is another reason for investors to buy this stock. Their target price remains unchanged at $1.20.
As at 1.33pm, shares in Genting Singapore are trading 4.5 cents higher or 4.62% up at $1.02.
