Analysts are positive on Genting Singapore (GENS) on the back of a recovery in the tourism sector.
RHB Group Research and Citibank Group Research have both seen an improvement in peer Marina Bay Sands (MBS), which is owned by Las Vegas Sands Corporation (LVS) due to the improvement in the tourism sector in Singapore, as borders reopen and testing requirements for tourists into Singapore are lifted.
Hence, the two research houses are of the opinion that Genting Singapore’s Resort World Sentosa (RWS) will also benefit and see similar improvements in results as MBS.
LVS recently released its 1QFY2022 ended March results, which saw MBS’ property ebitda climbed from US$17 million ($23.4 million) January to US$46 million in February to US$58 million in March.
The management sees this positive momentum continuing into April and expects the property to return to US$1 billion ebitda run rate by end-2022, on the back of the Vaccinated Travel Framework effective from April 1, 2022 that will be replacing VTLs, which provide quarantine-free entry to Singapore for all vaccinated travellers.
MBS’s 1QFY2022 net revenue rose 8% q-o-q to US$399 million, with its property ebitda coming in at US$121 million.
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As at end-1QFY2022, LVS has spent approximately U $1 billion out of the budgeted capex of US$3.3 billion on the MBS expansion plan.
At MBS, hotel occupancy has increased to 84% from 79% in 4QFY2021 and revenue per available room (RevPAR) has increased approximately 5% q-o-q to about US$215.
Citibank Group Research analysts George Choi and Ryan Cheung have kept their “buy” rating on the stock with an unchanged target price of $1.01.
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Choi and Cheung expect Genting Singapore to report 1QFY2022 revenue of $318 million, approximately 50% of its 1QFY2019 level and ebitda of $84 million, approximately 25% of its 1QFY2019 level.
According to the analysts, MBS’s results beat their ebitda forecast of US$79 million as mass (tables and slots) volumes came in approximately 15%-20% better than their expectations, with mass and slot gross gaming revenue (GGR) increasing 44% and 14% q-o-q respectively.
The team at RHB Group Research has also kept a “buy” rating on Genting Singapore with a target price of 95 cents.
LVS’s management is upbeat on Singapore, though MBS’s hold-normalised adjusted property ebitda is still less than 30% of pre-Covid-19 levels. Regardless, management pointed to the m-o-m improvements in 1QFY2022 and is optimistic about MBS’s prospects.
The research team notes that as China currently faces stricter Covid-19 restrictions, there will likely be a diversion of visitors from Macau to Singapore especially amid Singapore’s most recent reopening measures, benefitting Genting’s business at large in the city-state.
“While the strict lockdowns in China will likely continue to weigh on Genting’s VIP segment, the return of visitors from Genting’s other markets such as Malaysia, Indonesia, South Korea, Japan should still drive meaningful recovery,” writes the research team.
“Based on MBS’s 1QFY2022 results and outlook, we believe Genting should also see an uptick in gaming and non-gaming revenues in 1QFY2022,” the research team adds.
Some key downside risks the analysts note include re-closure of international borders, the recovery of VIPs being less than expected, government amendments to casino laws that could set limits on local Singaporeans visiting casinos and bad debt provision is higher than expected.
As at 2.30pm, shares in Genting Singapore are trading flat at 81 cents at a FY2022 P/B ratio of 1.2x and dividend yield of 2.5% according to RHB’s estimates.
