UOB Kay Hian Research analysts Vincent Khoo and Jack Goh have kept an “overweight” call for the gaming sector, and are confident that Singapore’s casinos are poised for better recovery for the rest of the year.
This is in light of how Singapore has scrapped the previous quota-based Vaccinated Travel Lane (VTL) arrangement, replacing it with a new Vaccinated Travel Framework (VTF) which allows fully-vaccinated travellers to enter Singapore free of quarantine and on-arrival tests. Pre-departure tests are also no longer required for travellers entering Singapore from April 26 onwards.
The analysts therefore expect the gaming industry to benefit from surging international patronage and gross gaming revenue (GGR).
As a result, Khoo and Goh have kept a “buy” rating on Genting Singapore with a target price of $1.08. “We continue to expect cash-flushed Genting Singapore with net cash accounts accounting for 32% of market cap to engage in significantly better capital management moving forward,” they say.
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According to Las Vegas Sands’ (LVS) 1QFY2022 results, Marina Bay Sands’ (MBS) adjusted ebitda declined 16% y-o-y to US$121 million, whereas the hold-normalised adjusted ebitda improved marginally by 4.3% y-o-y to US$121 million as 1QFY2021 benefitted from an exceptionally high win rate.
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MBS’ 1QFY2022 net gaming revenue had also recovered 12.7% q-o-q to 49% of pre-Covid-19 levels. On a constant currency basis, 1QFY2022’s mass market GGR shrank 2% y-o-y but rose 27% q-o-q, while VIP GGR fell 25% y-o-y and 25% q-o-q.
MBS’ 1QFY2022 ebitda margin dropped to 30.3% as compared to in 4QFY2021 at 48.1%.
“On a constant currency basis of Singapore dollars, we estimate MBS' 1QFY2022 rolling chip volume (RCV) rose 27.5% y-o-y and represented 27% of pre-Covid-19 levels, mainly due to Singapore’s border closure and travel impediments,” say Khoo and Goh.
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Nevertheless, the stronger RCV was hampered by a lower win rate of 3.3% in 1QFY2022 as compared to 4QFY2021’s 6.32%, resulting in GGR decreasing 25% q-o-q and 25% y-o-y. However, the win rate also plunged to 3.30% from 1QFY2021’s 5.59%, causing VIP GGR to fall 25% y-o-y in 1QFY2022.
The analysts estimate that the mass market non-rolling chip volume in Singapore dollars rose 20% yoy to represent the second-highest quarter since the Covid-19 outbreak in 2QFY2020 at 59% of pre-Covid-19 levels, but slot handle declined 11% yoy to only about 92% of pre-Covid-19 levels.
With the overall higher mass volume up 20% y-o-y but with a lower win rate, mass table GGR surged 11% y-o-y while slot GGR fell 13% y-o-y in 1QFY2022.
The overall mass market GGR fell 2% y-o-y.
“We expect the more local-dependent Resorts World Sentosa (RWS) to largely sustain its 3Q-4QFY2021 GGR levels, which represent about 58% of pre-Covid-19 levels,’ they say.
The analysts also observe how resilient local patronage continues to serve as a significant interim earnings cushion, in addition to international visitations trickling in with Singapore relaxing social distancing measures and border restrictions.
As at 10.33am, shares in Genting Singapore are trading flat at 81 cents.